Weekly Business Insights from Top Ten Business Magazines | Week 300 | Shaping Section | 3

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 300 | June 9-15, 2023.

America’s Long, Tortured Journey to Build EV Batteries

By Gabrielle Coppola | Bloomberg Businessweek | June 8, 2023

Listen to the Extractive Summary of the Article

On a 3-mile stretch of farmland in southwest Michigan, Ford Motor Co. is building a battery factory. The technology Ford needs to make cheap, stable batteries to power electric vehicles will come from China’s Contemporary Amperex Technology Co. Ltd., better known as CATL, the world’s biggest battery manufacturer. By most measures, Ford’s deal with the Chinese giant is a coup for the state—it’s getting a $3.5 billion investment in a 2.5-million-square-foot factory, thousands of new jobs and the ability to produce enough batteries annually to power 400,000 electric vehicles when the plant opens in 2026. But for anyone who’s been paying attention, it’s a devastating moment of irony for the US: The deal could have been the other way around.

In the mid-1990s, a compound called lithium iron phosphate (LFP), the primary battery chemistry now used by CATL and most battery companies in China, was discovered by scientists at the University of Texas at Austin and commercialized a few years later by the startup A123 Systems LLC in Watertown, Massachusetts. In 2009, A123 was awarded hundreds of millions of dollars by the Barack Obama administration with the great hope that it would help kick-start production of electric cars in the US. But it was too early. There wasn’t demand for EVs, and car companies making vehicles that use less gas didn’t want to risk relying on an unproven startup.

By 2012, A123 had filed for bankruptcy and become a symbol of government waste often mentioned in the same breath as Solyndra, the California solar-panel maker that filed for bankruptcy in 2011 after receiving a half-billion dollars in federal loan guarantees. To this day, Dave Vieau, A123’s former chief executive officer, is dogged by occasional finger-wagging when people learn he ran the company. “You’re the A123 guy who stole all the government money” is a line he’s gotten more than once.  In 2013, China’s then-biggest auto parts company purchased A123 out of bankruptcy. That year the Chinese government also began implementing its plan to build a domestic EV market at a breathtaking pace. A decade later, China accounts for 58% of the world’s EV sales and 83% of all lithium-ion battery manufacturing.  The US is now at least a decade behind China when it comes to battery manufacturing, in terms of both the necessary technology and the capacity, industry experts say. 

Now, almost 30 years after the discovery of LFP, the US is scrambling to build its own battery supply chain, and the pioneer of the modern assembly line is turning to China to learn how to make the engine of the 21st century. It’s an unsubtle reminder that America learned the wrong lesson from A123. Rather than letting a potentially breakthrough technology, or a young company trying to commercialize that technology, live or die by the whims of the free market, the US could have been committed to a much longer game.  With the wisdom of hindsight, A123 is a case for tweaking the orthodox rules of American capitalism in the age of competition with China.

3 key takeaways from the article

1. Ford Motor Co., in collaboration with China’s Contemporary Amperex Technology Co. Ltd., better known as CATL, the world’s biggest battery manufacturer is building a battery factory. By most measures, Ford’s deal with the Chinese giant is a coup for the state.
2. In the mid-1990s, a compound called lithium iron phosphate (LFP), the primary battery chemistry now used by CATL and most battery companies in China, was discovered by scientists at the University of Texas at Austin and commercialized a few years later by the startup A123 Systems LLC in Watertown, Massachusetts. But it was too early. There wasn’t demand for EVs, and car companies making vehicles that use less gas didn’t want to risk relying on an unproven startup.
3. By 2012, A123 had filed for bankruptcy and become a symbol of government waste.   In 2013, China’s then-biggest auto parts company purchased A123 out of bankruptcy.  A decade later, China accounts for 58% of the world’s EV sales and 83% of all lithium-ion battery manufacturing.

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Topics:  Automobiles, Technology, Electric Vehicles