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How Big is the Battery Market for Electric Vehicles?

On Thursday, A123 Systems (AONE) had an extremely successful IPO for its lithium-ion based battery for electric vehicles, which begs the question How Big is the Battery Market for Electric Vehicles, according to a report Semiconductors for Alternative Energy Technologies: Opportunities and Markets, recently published by The Information Network, a New Tripoli, PA-based market research company.

On Thursday, A123 Systems (AONE) had an extremely successful IPO. The company uses proprietary nanoscale material technology developed at and licensed from the Massachusetts Institute of Technology. A123 Systems is also utilizing its 215 employees for R&D on new generations of this core nanophosphate technology. It recently developed an ultra high power battery for the Vodafone McLaren Mercedes team that provides more than ten times the W/kg as compared to a standard Prius battery.

How big the market for batteries for electric cars and the competition A123 Systems faces are key issues facing investors. On the end-user side, data show that the number of EV (electric vehicle), HEV (hybrid electric vehicle), PHEV (plug-in hybrid electric vehicle) models with an annual production run of at least 20,000 vehicles will grow from 19 models in 2009 to over 150 models in 2014 and over 200 models in 2019. In addition, estimates for the global lithium-ion battery market for automotive application in EVs, PHEVs, and HEVs are $31.9 million in 2009 growing to $21.8 billion by 2015 and $74.1 billion by 2020.

According to Dr. Robert Castellano, president of The Information Network, "Light-weight, high-energy-density lithium ion batteries, which can enable a car to go up to 300 miles on a charge, can cost as much as $35,000, which coincidentally is the replacement cost for the new Tesla Motors Roadster."

Clearly the market potential for lithium-ion batteries for automobiles is huge. But cost is a critical factor, and as they are new, so is durability. In a report released in January 2009, the DOE pointed out that the current cost of Li-based batteries is approximately a factor of three-five too high on a kWh basis for HEVs, and two times too high for HEVs.. Also, the ability to attain a 15-year life, or 300,000 HEV cycles, or 5,000 EV cycles are unproven and are anticipated to be difficult.

A123 Systems competes in the Li-ion battery space with companies including Advanced Battery Technologies(ABAT),Altair Nanotechnologies (ALTI), China Sun Group (CSGH), Ener1 (HEV), Hong Kong Highpower Technology (HPJ), and Valence Technologies (VLNC).

A123 Systems with its Lithium-ion technology also competes with advanced lead-acid battery (lead carbon) producers like Axion Power International (AXPW.OB), C&D Technologies (CHP), Enersys (ENS), and Exide Technologies (XIDE).

Let's not forget the NiMH battery. ECD Ovonics (ENER) has licensed its battery technology to every major manufacturer of NiMH batteries, all 35 of them. It's a market prohected to be $1,230 million market for HEVs in 2011 compared to a $320 million market for automotive Li-ion batteries.

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