Wednesday, September 9, 2009

Will China Corner the Hybrid Car Battery Market?

With China poised to surpass the United States as the world's largest automobile market this year, the Chinese government has announced plans to help the nation leapfrog Japan to become the largest producer of all-electric and hybrid vehicles in the world. By committing to electric vehicle production, China is also attempting to reduce urban air pollution, carbon emissions and growing dependence on imported oil.

A current production Toyota Prius nickel metal hydride battery pack uses 30 kilograms of nickel, 2 kilograms of cobalt and 12 kilograms of lanthanum because the active hydrogen storage alloy in the battery is either LaNi4.5Co0.5 or (Ce, La, Nd, Pr)Ni5. The Prius assembly plant in Japan has so far used one and 1.5 million rechargeable nickel metal hydride battery packs and achieved with them some of the lowest numbers of service issues ever seen in the OEM automotive industry. In fact most of the original Prius rechargeable nickel metal hydride battery packs have exceeded their 8-year 100,000 mile warranty and are still functioning, according to Resource Investor website.

China controls 95% of the world’s supply of rare earth elements, a class of ores used not just in Prius batteries but in a wide range of high-technology applications, from sonar systems to wind turbines, mobile phones and fluorescent lights.

All this gives China an extraordinary - some might say unfair - advantage to lead the race to dominate the manufacture of cutting-edge technology, according to the Wall Street Journal. Even before any major technology partnership announcements, there are reports that the legendary US investor Warren Buffet is investing in BYD, an obscure Chinese battery, mobile phone, and electric car company.

Toyota and Honda, the two currently leading makers of hybrid vehicles, do not think the Li-on technology is ready for prime time yet. They reportedly are going with an upgraded NiMH battery, using the rare earth elements found in China. Carlos Ghosn, on the other hand, is taking Nissan directly into what he thinks will be the ultimate answer, a Li-on powered electric car with a short stop in hybrid-land, but still powered with Li-on.

Last year, Honda announced that it would produce only hybrid motor vehicles by 2018, and others are likely to follow in its footsteps. As the demand for nickel hydride car batteries grows, those depending on such ores may be forced in the near term to invest in rare earth development in Inner Mongolia, Jiangxi and some other southern provinces to secure supply. In fact, some companies already have done just that. Right now, it’s stuff like X-ray screen makers, phosphor-panel and lamp manufacturers and other electronics firms that have set up joint ventures in China.

What China is waiting for is for the really high-end technology with mass market leverage like hybrid car batteries to beat a path to its door, says the Wall Street Journal. Beijing will have a window to get to a position of advantage with high-end manufacturers as it holds most of the cards for now.

Meanwhile,the new auto-industry plan, published on the main Web site of China's central government, says China aims to build capacity to manufacture 500,000 "new energy" vehicles, such as all-electric battery cars and plug-in electric hybrid vehicles. The plan aims to increase sales of such new-energy cars to account for about 5% of China's passenger vehicle sales.


Related Links:

China's Electric Ambitions

Buffet Investing in Chinese Battery Maker

Car Battery Battle Between Li-on and Nickel Metal Hydride

Auto Industry Prospects in India, Pakistan and China

Pakistan Automobiles Report 2009

Auto Pakistan Expo 2009

Pakistan Automotive Report

China Surpasses US in Auto Sales

Auto Industry in India

India's Global Shopping Spree

14 comments:

Anonymous said...

On a related note here are two news items which came out today which shows how far Indian auto manufacturers have gone ahead despite being so late in the game. We pakistan had an advantage for decades when we use to have Toyotas and Hondas assemble in Pak while Indians were driving khatara Fiat and Ambassador. Today they are exporting to Europe and we can't even export to Bangladesh.

What do you think is the reason for Pakistan's backwardness is anything to do with technology or manufacturing. I think the reason is our over dependence on religion.
=====================
RTTNews) - Suzuki Motor Corporation, Hyundai Motor Co., and Nissan Motor
Co. are making India as a marketing hub for overseas sales of mini cars, as
incentives lift demand for smaller, fuel-efficient autos. This year India
outperformed China in auto exports and poses challenge to Thailand and South
Korea, as an alternative production center in Asia., media reports said.


In Jan-August 2009 period, Maruti Suzuki India's exports were more than
doubled to 79,860 vehicles. It aims to ship 130,000 vehicles during the
current fiscal year, 86% more than last year, R.C. Bhargava, Chairman,
reportedly said. In August, Maruti exported 14,847 vehicles, and the
cumulative sales up to August this fiscal were 54,707 units.


The Society of Indian Automobile Manufacturers data say India's exports of
mini cars and hatchbacks gained 44% between January and July to 20,138.
Total exports, including vans, sport-utility vehicles and trucks, rose 18%
to 229,809. Cars are exported to over 100 countries (excluding the US and
Japan markets).


In contrast, China's exports plunged 60% to 164,800 between January and
July, as per government data. Vehicles produced in Thailand for export
declined 43% to 263,768, the Thai Automotive Club data say.


South Korean exports dropped 31% to 1.12 million units, according to the
Korea Automobile Manufacturers Association. Japan, the world's largest
automobile producer and exporter, shipped 1.77 million cars, trucks and
buses. Of those, 135 were mini cars and 439,849 were compacts, the release
said.


Jayesh Shroff, who helps manage around $7 billion of assets, including car
maker shares at SBI Asset Management Co in Mumbai, said: "There is a
worldwide shift toward fuel-efficient, compact cars. This offers a huge
potential for India and it can emerge as a leader in the small car segment."


by RTT Staff Writer


NEW DELHI -- The Indian unit of Honda Motor Co. said Tuesday it will start
exporting engine parts to its parent company in Japan from October.


The engine parts - connecting rods and crank shafts - will be exported from
Honda's second factory in the northwestern state of Rajasthan, Honda Siel
Cars India Ltd. said in a statement. The company has another factory at
Greater Noida in the northern state of Uttar Pradesh.


Honda Siel currently uses the parts for producing the Jazz hatchback and the
City sedan.


"Honda Siel has bagged the export order due to a rapid increase in the sale
of small cars in Japan, which has led to a capacity constraint at Honda
facilities for these components," the company said.


Honda Siel will produce 54,000 sets of these parts for export over six
months.


The exports will help integrate Honda Siel with the parent company's
pan-Asia supply chain network, the company said.


Write to Nikhil Gulati at nikhil.gul...@dowjones.com

Anonymous said...

Anon:

You said: "We pakistan had an advantage for decades when we use to have Toyotas and Hondas assemble in Pak while Indians were driving khatara Fiat and Ambassador"

- There is one thing to assemble vehicles and another to develop, design and manufacture them. The former is easy and the latter is difficult. The former gives easy rights to brag and the latter gives advantage of self-reliance.

For decades, India denied access to foreign carmakers, such as Honda or Toyota, to nurture local industry. Now, when the foreign carmakers are allowed they usually tie up with some local partner in the value chain. The design, development and manufacturing of small vehicles is definately going to be an Indian contribution to the world of motoring for the forseable future.

Riaz Haq said...

Pakistan auto sector saw robust growth in 2001-2008. In 2007-8, auto sector produced over a million motorcycles and 165,000 cars in addition to tractors, trucks, buses etc.

In addition to new assembly plants, the growth in consumer demand supported significant domestic auto parts production in Pakistan.

Pakistan's auto parts manufacturing is a billion US dollars a year industry. Sixty percent of its output goes to the motor cycle industry, 22% is for cars, and the rest is consumed by trucks, buses & tractors.

Anonymous said...

Riaz,

You missed the point in your chest thumping. The motoring industry in India or Pakistan has been growing and will continue to grow owing to the large populations which largely remain untapped. However, so far, how many local brands in Pakistan have grown to be of regional repute, if not of global repute?

My response was to the comment that spoke of having advantage because some sections of the society drove Toyotas and Hondas. I found that comment silly. By that yardstick, the Saudis should boast of being the leader in motoring because of their ability to not only buy any car they like but also drive it because of overly-subsidized gas.

Riaz Haq said...

Anon: "how many local brands in Pakistan have grown to be of regional repute, if not of global repute?"

How many local brands does India have? Do you think Maruti and Ambassador are local brands?

Nano is nothing to write home about. It's just a glorified version of a lawn mower powered by a two-stroke engine. It has almost no safety features.

On the other hand, what the Chinese are doing with the electric car is real serious innovation and development in an attempt to leapfrog the Japanese.

Anonymous said...

Riaz,

I like how competitive you get with borrowed nationalism quick to dismiss achievements of others.

Fyi, Tata Nano has filed 34 patents in its development process and is going to be launched in Europe soon with additional features for the european market. Later, an American version will be followed because there a demand for it.
more here: http://www.youtube.com/watch?v=3sZitve3SUw&feature=PlayList&p=9DAB5C766EB292BC&playnext=1&playnext_from=PL&index=12

Mahindra is an Indian brand which makes SUV's and tractors in the motoring industry. Its tractor division is third largest in the world with a global presence eating in to John Deeres's share of market in the US.

The Reva, a joint venture, headquartered in Bangalore is an city electric car for the export market as well as domestic one. With already 3000 cars on the road there demand for more.

And, there are other lite local brands which make up for a good share of domestic and export motoring market in Asia such as Bajaj and Eicher.

Anonymous said...

Riaz,

I like how competitive you get with borrowed nationalism quick to dismiss achievements of others.

Fyi, Tata Nano has filed 34 patents in its development process and is going to be launched in Europe soon with additional features for the european market. Later, an American version will be followed because there a demand for it.
more here: http://www.youtube.com/watch?v=3sZitve3SUw&feature=PlayList&p=9DAB5C766EB292BC&playnext=1&playnext_from=PL&index=12

Mahindra is an Indian brand which makes SUV's and tractors in the motoring industry. Its tractor division is third largest in the world with a global presence eating in to John Deeres's share of market in the US.

The Reva, a joint venture, headquartered in Bangalore is an city electric car for the export market as well as domestic one. With already 3000 cars on the road there demand for more.

And, there are other lite local brands which make up for a good share of domestic and export motoring market in Asia such as Bajaj and Eicher.

Anonymous said...

General motor is plannig to tieup with reva to launch it world wide. To take advantage of the good design and stability over period of time on reva product line.

Riaz Haq said...

Pakistan is now using domestically and exporting CNG kits to various countries including China, Brazil and Italy. Almost 2 million vehicles on the country's roads have dual fuel options with Suzuki having the highest in quantity. According to various reports, India significantly lagging Pakistan in clean energy and CNG usage with far fewer CNG stations and smaller gas pipeline infrastructure than Pakistan.

http://www.riazhaq.com/2009/12/pakistan-leads-south-asia-in-use-of.html

Riaz Haq said...

Amidst China-Japan tensions over a Chinese captain's arrest in disputed waters, the Chinese have stopped shipping rare earth metal exports to Japan. Here's a New York Times report:

Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.

Chinese customs officials are halting shipments to Japan of so-called rare earth elements, preventing them from being loading aboard ships at Chinese ports, industry officials said on Thursday.

On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese coast guard vessels about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.

A Chinese Commerce Ministry spokesman declined on Thursday morning to discuss the country’s trade policy on rare earths, saying only that Mr. Wen’s comments remained the Chinese government’s position. News agencies later reported that Chen Rongkai, another ministry spokesman, had denied that any embargo had been imposed.

Any publication of government regulations or other official pronouncements barring exports would allow Japan to file an immediate complaint with the World Trade Organization, alleging a violation of free trade rules. But an administrative halt to exports, by preventing the loading of rare earths on ships bound for Japan, is much harder to challenge at the W.T.O.

The United States, the European Union and Mexico brought W.T.O. complaints against China last November after it issued regulations limiting the export of yellow phosphorus and eight other industrial materials. American trade officials have been considering for months whether to challenge China’s longstanding and increasingly tight quotas on rare earth exports as well.

China mines 93 percent of the world’s rare earth minerals, and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound. ...

Anonymous said...

Reko Diq controversy is something that suggests to me that the politicians in Islamabad have botched the handing out of mining licenses at beat and have sold out a huge asset for peanuts at worst for whatever reason. Even in the Pakistan Supreme Court, the discussion is on the copper and gold assets, while the rare earths and rare metals like Samarium, Dysprosium, Neodymium, Niobium etc are not even spoken about. And, the companies that have been granted the mining contract are offering to pay a 2% royalty while the Pakistan government is asking for 5%. I can understand this percentage being offered for copper and for gold which are very expensive to extract even if some of the new reduction methods are used, but since the ores are going to be processed in Chile and Canada, someone is certain to go laughing to the bank at Pakistani citizens' expense. The figures of $ 260 billion worth of copper and gold that are being bandied about are a smokescreen - the rare earths and rare metals available there are almost certainly worth considerably more.

Best wishes and I hope that saner counsel prevails in the Pakistani legal system. If this business is allowed to go ahead - even at the 5% royalty demanded by the government - it will have been a theft of Pakistani national assets.

HopeWins Junior said...

Dr. Haq,

Before we ask whether our BFF China will corner the hybrid-car batter market, we must ask whether they have managed to corner the Solar PV-panels market as their policy called for many years ago.

Here are the results as described by Professor Chovanec of Tsinghua University (Elite School) --

http://chovanec.wordpress.com/2012/09/13/wsj-chinas-solyndra-economy/

http://chovanec.wordpress.com/2012/10/10/npr-whats-going-wrong-with-chinas-solar-industry/

http://www.nytimes.com/2012/10/05/business/global/glut-of-solar-panels-is-a-new-test-for-china.html?_r=2&pagewanted=all&

Something to think about. Our BFF may be getting into some REALLY BIG trouble soon. Cornering the Hybrid-car battery market may well be the last thing on their minds very shortly...

Thank you.

HopeWins Junior said...

^^^RH: "How many local brands does India have? Do you think Maruti and Ambassador are local brands? Nano is nothing to write home about. It's just a glorified version of a lawn mower powered by a two-stroke engine. It has almost no safety features."
---

Dr. Haq,

Just a few observations:

1) A "brand" does not imply innovation or technology origination. Suzuki and Oxford/Morris are not Indian brands. However, Maruti and HM/Ambassador are indeed Indian brands.

The most famous example of this is the Royal Enfield. This was a British brand that was shut down in UK in 1971, but continued to exist in India. Today, "Royal Enfield" is very much an Indian brand, even though India did not create either the brand or the technology.

http://royalenfield.com/
http://en.wikipedia.org/wiki/Royal_Enfield

In summary, there is nothing necessarily high-tech or innovative about a "brand". It is merely a marketing mechanism that increases sales volumes and reduces price-competition pressures by converting commodity-like products into apparently-differentiated products.

2) You are correct that the "Nano", by itself, is a failure. However, Tata’s intentions were not quite as simple as just making the cheapest car in the world. What Tata wanted to do was as follows:
(a) Generate publicity to differentiate and establish India as a global hub for small(kei) vehicle production and exports.
(b) Create a simple, low-cost 4-wheel platform for a wide range of TATA-branded last-mile small vehicles.

As you can see, they have been very, very successful at both(a)&(b).

The Nano car, even though it did not sell as much as expected, did generate the international publicity that convinced all global brands to turn India into a global hub for small(kei) car production. India's car and auto-component exports have grown exponentially because Tata imprinted the capabilities of India's small-car industry on the minds of the executives at major MNC automakers with the Nano publicity.

In addition, the basic platform of the Nano has been a stellar success for Tata in the form of the Tata Ace and all its related kei commercial vehicle products like Tata Magic/Iris. The Tata Ace & Magic/Iris were supposed to compete with 3-wheeler commercial vehicles just as their cousin, the Tata Nano, was supposed to complete with 2-wheeler passenger vehicles. The runaway success of the Tata Ace has established the Nano platform for a variety of future applications all over the world.

http://ace.tatamotors.com/index.php
http://www.magiciris.tatamotors.com/
http://en.wikipedia.org/wiki/Tata_Ace

I hope this clarifies things a bit.

Thank you.

HopeWins Junior said...

^^^HWJ: "The most famous example of this is the Royal Enfield."
--

Here is a photograph that is so very rich in irony:
http://alturl.com/yi3to

A British brand that they shut-down 40 years ago is now selling as a cult-bike in England in the form of an Indian IMPORT. "Classic in Battle-green" model is to the left and custom-painted "Thunderbird 500" model is to the right.

Note the following:
1) There is no technological innovation from India at all. This is a typical motorcycle that could have been made anywhere--nothing special.
2) All the basic design-styles are old & foreign; no Indian creativity is involved. The design-styles range from 1945 (Classic) to 1960 (Bullet) to 1985 (Thunderbird).

And YET India manages to EXPORT them at TOP PRICE (huge profit margins) because they own the "brand" and have used good marketing to make it a must-have cult-bike for retro-enthusiasts in England & elsewhere.

Exports to US -- See JAY LENO with his Royal Enfield that was IMPORTED from India:
http://www.enfieldmotorcycles.com/#&panel1-3

Clearly, we have a lot to learn in Pakistan about the importance of branding & marketing in exports. And we can certainly learn, but only if we desist from spending all our time obsessively-fixating on the obvious, well-known and self-evident truth of the widespread practice of open defecation in India.