DETROIT — Explosive growth in the number of hybrid gas/electric vehicles manufactured and sold in coming years may strain makers of the expensive battery packs that help power them, according to a report in USA Today on November 25. With relatively few hybrid models on the market, the three major suppliers of the batteries – Japan´s Panasonic and Sanyo and U.S.-based Cobasys – may have enough production capacity to meet automakers´ current plans over the next few years. But without expansion or more players coming into the market, batteries could be in short supply three or four years from now when more automakers expect to begin selling hybrids. Even now, suppliers appear unable to quickly add production. Ford Motor Co. has already complained that Sanyo – battery supplier for the hybrid version of the Escape sport/utility vehicle – can´t build enough batteries. The hybrid Escape went on sale in September. Ford expects to build 20,000 for the 2005-model year but would like to build more. Ford is in talks with Sanyo about boosting production. It also is talking with other hybrid battery makers to get more supply. Sanyo officials in Detroit said they could not talk about their production plans because of contract agreements with Ford. Automakers hope that the growing popularity of hybrids will entice other companies to build the battery packs, increasing competition and ultimately reducing the price, which now can run as high as $5,000. That added competition is likely, says Brion Tanous, an equity research analyst at Merriman Curhan Ford & Co. in San Francisco. "Over the next three to six months, you will see a flurry of announcements of what battery companies have design contracts and what hybrid vehicles are coming from the automakers," he says. Hybrid vehicle designs vary. But all use an electric motor, powered by a battery pack, to aid the gasoline engine. Energy generated when the brakes are applied recharges the battery. The electric/gas combination – some foreign designs use diesel – dramatically increases fuel economy and reduces tailpipe emissions. Hybrid batteries use nickel metal hydride, rather than the lead used for non-hybrid car batteries. The nickel metal hydride batteries can hold twice as much energy as lead batteries, have a longer life cycle and require no maintenance; the materials in them and are far less toxic than regular car batteries. But they can be heavy and bulky, so battery makers are searching for ways of making them lighter yet more powerful. J.D. Power and Associates estimates that by 2007, about 410,000 hybrid vehicles will be sold in the United States, up from an estimated 70,000 this year and about 47,500 in 2003. By 2011, about 35 hybrid models will be on the market, predicts Anthony Pratt, a forecaster for J.D. Power. "There will be hybrids in every segment." Other battery makers will help meet the increasing demand when they complete the vigorous testing required of battery packs, says Bob Stempel, former CEO of General Motors who is now CEO of Energy Conversion Devices. ECD and Chevron/Texaco own Cobasys in a 50/50 joint venture. "The automakers want a year´s worth of testing before they put it in their vehicles," he says. Besides increasing hybrid models and sales, another problem could threaten the future supply of batteries. As cellphone companies begin updating the backup generators at their towers, they may move to nickel metal hydride batteries for the same reason automakers turned to them for hybrid cars. Most cell towers currently rely on several lead batteries stored in a shed near the tower for power during blackouts.

Originally posted on Fleet Financials