Change CountryAbout Us Lithium-ion hybrid vehicles
Lithium-ion hybrid vehicle batteries are investment in the future
By Glen Ponczak
Vice President, Investor Relations, Johnson Controls
March / April 2010
Johnson Controls has the leading market position in the emerging industry for lithium-ion hybrid vehicle batteries.
We have established commercial viability through customers who have awarded us long-term production contracts. The company has production contracts with Ford, Daimler, BMW and Azure Dynamics. Notably, we have pre-production development contracts with several global customers, including Jaguar Land Rover and Volkswagen, in support of their production program plans. Johnson Controls, in a joint venture with Saft America, named Johnson Controls-Saft Advanced Power Solutions, launched the world’s first automotive lithium-ion cell manufacturing and battery assembly facility in Nersac, France in 2008.
We believe we have significant technical competitive advantages. We have multiple lithium chemistries with both spiral wound and rectolinear (flat plate) geometries. Our automotive electronics business provides us with in-house expertise for the thermal and charging electronics required to maximize life and performance of lithium battery systems. After decades in the automotive interiors and battery businesses, we have existing relationships with all of the world’s major automakers as well as unique industry experience.
In August 2009 we were awarded the largest ARRA matching grant, $299.5 million, to create an advanced battery manufacturing capacity in the United States. This grant is in addition to significant incentives from the State of Michigan. This government support significantly reduces the amount of initial capital we have to invest.
Construction of our plant in Holland, Michigan is progressing as planned with battery pack assembly set to begin in August of this year and cell production starting in 2011.
We will support several important customers from this facility. Johnson Controls is the exclusive supplier for the complete battery system for Ford Motor Company’s first series production plug-in hybrid electric vehicle (PHEV), which will be introduced in 2012. In October it was announced that we will supply batteries for the Ford Transit Connect commercial van in 2010 in collaboration with Azure Dynamics. We are working with Azure to supply batteries for other commercial delivery trucks that will start in production in 2010.
Despite our market leadership and advantages, we caution investors to take a long-term view of the industry. As is typical in a nascent industry, there are still many unknowns and challenges.
Sustained success in this industry ultimately depends upon creating demand for electric drive vehicles. As an industry, we run the risk of creating more capacity to build batteries and critical components for new electric drive vehicles than what the market will demand, particularly during the early stage of commercialization. Of concern is the near-term, i.e., 2010 through 2015 when market demand, if left uncatalyzed, will lag manufacturing capacity. We estimate that by 2015 domestic capacity in vehicle units will exceed demand by approximately 1.35 million units, a gap of more than 60 percent.
Early in the life cycle of any new product or technology, scale is one of the critical factors enabling manufacturing success, as well as cost reductions. The ability to achieve scale will be limited by the low initial volumes of electric drive vehicles and further hampered by the lack of industry standards, resulting in one-off system designs instead of high volume standardized packs.
Even the auto makers’ business models are unresolved. Some OEs are considering in-house development and manufacture of the complete battery system or some of the components. In the early growth stages of this industry, many such business models will likely emerge. It may be years before we know which models are successful. Those outcomes could significantly influence the structure of the supply base and which suppliers will win in the marketplace.
Lastly, while Johnson Controls expects continued success in the lithium ion hybrid vehicle battery business, it will be several years before it will make a meaningful contribution to earnings. By the year 2020, however, the market for lithium ion vehicle batteries might be as much as $20 to $30 billion a year. We believe we are making the right investments to expand our leadership position as the long-term market develops.
Glen has been with Johnson Controls for 22 years, serving in a variety of communication leadership positions. Glen was recently named the Best Investor Relations Professional in the automotive sector by both buy-side and sell-side analysts polled by Institutional Investor magazine. You can e-mail Glen at Glen_L_Ponczak_AT_jci_com.
Vice President, Investor Relations, Johnson Controls
March / April 2010
Johnson Controls has the leading market position in the emerging industry for lithium-ion hybrid vehicle batteries.
We have established commercial viability through customers who have awarded us long-term production contracts. The company has production contracts with Ford, Daimler, BMW and Azure Dynamics. Notably, we have pre-production development contracts with several global customers, including Jaguar Land Rover and Volkswagen, in support of their production program plans. Johnson Controls, in a joint venture with Saft America, named Johnson Controls-Saft Advanced Power Solutions, launched the world’s first automotive lithium-ion cell manufacturing and battery assembly facility in Nersac, France in 2008.
We believe we have significant technical competitive advantages. We have multiple lithium chemistries with both spiral wound and rectolinear (flat plate) geometries. Our automotive electronics business provides us with in-house expertise for the thermal and charging electronics required to maximize life and performance of lithium battery systems. After decades in the automotive interiors and battery businesses, we have existing relationships with all of the world’s major automakers as well as unique industry experience.
In August 2009 we were awarded the largest ARRA matching grant, $299.5 million, to create an advanced battery manufacturing capacity in the United States. This grant is in addition to significant incentives from the State of Michigan. This government support significantly reduces the amount of initial capital we have to invest.
Construction of our plant in Holland, Michigan is progressing as planned with battery pack assembly set to begin in August of this year and cell production starting in 2011.
We will support several important customers from this facility. Johnson Controls is the exclusive supplier for the complete battery system for Ford Motor Company’s first series production plug-in hybrid electric vehicle (PHEV), which will be introduced in 2012. In October it was announced that we will supply batteries for the Ford Transit Connect commercial van in 2010 in collaboration with Azure Dynamics. We are working with Azure to supply batteries for other commercial delivery trucks that will start in production in 2010.
Despite our market leadership and advantages, we caution investors to take a long-term view of the industry. As is typical in a nascent industry, there are still many unknowns and challenges.
Sustained success in this industry ultimately depends upon creating demand for electric drive vehicles. As an industry, we run the risk of creating more capacity to build batteries and critical components for new electric drive vehicles than what the market will demand, particularly during the early stage of commercialization. Of concern is the near-term, i.e., 2010 through 2015 when market demand, if left uncatalyzed, will lag manufacturing capacity. We estimate that by 2015 domestic capacity in vehicle units will exceed demand by approximately 1.35 million units, a gap of more than 60 percent.
Early in the life cycle of any new product or technology, scale is one of the critical factors enabling manufacturing success, as well as cost reductions. The ability to achieve scale will be limited by the low initial volumes of electric drive vehicles and further hampered by the lack of industry standards, resulting in one-off system designs instead of high volume standardized packs.
Even the auto makers’ business models are unresolved. Some OEs are considering in-house development and manufacture of the complete battery system or some of the components. In the early growth stages of this industry, many such business models will likely emerge. It may be years before we know which models are successful. Those outcomes could significantly influence the structure of the supply base and which suppliers will win in the marketplace.
Lastly, while Johnson Controls expects continued success in the lithium ion hybrid vehicle battery business, it will be several years before it will make a meaningful contribution to earnings. By the year 2020, however, the market for lithium ion vehicle batteries might be as much as $20 to $30 billion a year. We believe we are making the right investments to expand our leadership position as the long-term market develops.
Glen has been with Johnson Controls for 22 years, serving in a variety of communication leadership positions. Glen was recently named the Best Investor Relations Professional in the automotive sector by both buy-side and sell-side analysts polled by Institutional Investor magazine. You can e-mail Glen at Glen_L_Ponczak_AT_jci_com.
1ST U.S. LITHIUM-ION PLANT
Johnson Controls-Saft is building the first U.S. cell manufacturing facility for lithium-ion hybrid batteries. more
