Road gets bumpy suddenly for car battery maker

Korea’s leading producers of secondary batteries for hybrid and electric cars are realizing the road to success in the product comes with twists.

General Motors recently suspended the production of its Volt electric car, an action that is expected to affect LG Chem, the sole supplier of the lithium-ion batteries for Volt.

According to the company, it stopped production of the Volt for five weeks beginning March 19, idling 1,300 workers at the Hamtramck assembly plant in Detroit. What the company called a “temporary shutdown” is attributed to the electric car’s sluggish sales.

LG Chem said, however, that the shutdown is only temporary and won’t affect it too much. According to industry analysts, the Volt accounted for two thirds of LG’s 300 billion won ($264.6 million) in electric and hybrid car battery sales last year.

“There could be some damage to LG Chem’s sales,” said an analyst who declined to be named. “The company targeted 800 billion won sales this year from the auto battery business. It has yet to lower its goal.”

Sales of the Volt have been disappointing although it was introduced with great fanfare in late 2010. Its hefty price tag of about $41,000, prior to a U.S. tax credit of up to $7,500, discouraged consumers from purchasing the vehicle. It is a fuel-efficient, pollution-free car but there are cheaper models with good mileage.

GM sold 7,671 of the vehicle in 2011, below its original target of 10,000. The company is no longer publicly announcing sales targets for Volt.

GM originally intended to sell 10,000 Volts last year and 60,000 this year. It sold 1,529 cars in December, 603 in January and 1,023 in February.

The sharp decline in sales of Volt is attributed to tests by the U.S. National Highway Traffic Safety Administration to see if there was a risk of batteries catching on fire in Volts after an accident. The U.S. federal regulators determined that the car was not riskier than vehicles with conventional gasoline engines but the publicity was bad for the Volt. The U.S. traffic administration said in January that “no discernible defect trend exists.”

LG Chem is running a battery plant in Ochang, North Chungcheong, with an annual capacity of units for 100,000 electric cars.

Batteries produced there are supplied to Hyundai’s Sonata and Avante hybrid models and Kia’s K5 hybrid sedan as well as the Volt. It also plans to supply batteries for Renault Samsung Motors, Ford and Eaton.

With the mass production of the Volt, LG quickly became an industry leader in the battery business. The company intends to double its investment in the plant to 2 trillion won by the end of 2013. It is building an additional plant in Ochang and a plant in Holland, Michigan.

“The shutdown in the Volt production does not affect our sales much,” said a spokesman at LG Chem. “The plant in Holland, Michigan is not yet completed. But if the situation continues, it may have some effect on us.”

Conversely, Samsung SDI is upbeat about BMW’s announcement that it will start production of i3 and i8 electric cars next year.

SD LiMotive, a joint venture between Germany-based Bosch and Samsung SDI, has been selected as the sole battery supplier for BMW.

Samsung SDI has been taking part in BMW’s electric car development since 2010, when it started supplying prototypes to the Munich-based automaker. Samsung SDI has a plant in Ulsan with an annual capacity for 50,000 battery cells of 60 amperes each.

The company plans to supply batteries to Chrysler, Delphi and BMW and raise its production to 400,000 battery cells by 2013. Samsung SDI also plans to open battery manufacturing bases in Europe, China and the United States.

By Limb Jae-un [jbiz91@joongang.co.kr]