What is the proper mythological metaphor for A123 Systems? Some might conjure up Icarus for the venture capital highflier whose business model melted in the heat of competition. Or maybe Sisyphus, for being asked to perform a series of impossible tasks, each ending in failure.
Now, however, the most apt myth would be the phoenix—the bird that regenerates from its own ashes. A123 is now officially a subsidiary of Wanxiang America, an Illinois-based auto parts supplier and the American arm of the Wanxiang Group of China, and has officially risen from the ashes of bankruptcy.
What will the new A123 look like? The company hasn’t declared any official moves yet, but here are a few of the things I’ve heard from industry participants about the strategic directions that a re-born A123 will likely take:
More cash. Wanxiang isn’t just giving A123 a lifeline. It is injecting a significant amount of capital into its new U.S. subsidiary. That capital will go toward qualifying for new projects (sometimes vendors have to show a certain amount of financial health to be able to bid on large capital-intensive projects). It will also help to underwrite a new research and development project.
New chemistries. A123 will work on developing the next generation battery chemistry, though its nano-engineered lithium iron phosphate chemistry will continue to be produced and supported for the applications it is best suited for.
Emphasis on systems integration. A123 will continue to be a player in the automotive sector, where its batteries are already scheduled to go into several Chinese models and the Chevy Spark EV, as well as developing a technology solution for the microhybrid segment. On the grid storage side, the company will emphasize its systems integration capabilities. Rather than just be a manufacturer of cells, the company wants to provide complete systems, including controls, inverters, voltage regulators, fire suppression systems, and transformers. It’s a smart move considering that cells are quickly becoming a low-margin commodity.
So where does the new A123 Systems fit into the newly transformed energy storage landscape? Actually, it fits pretty well. During the bubble years of the energy storage industry (2010 to 2012), many companies crashed and burned— literally. A spate of fire events spelled doom for a handful of startups that had otherwise promising technologies, and the expected flood of utility orders never arrived. Batteries are still too expensive to make sense for most applications. Now the lineup of vendors active in the area has been winnowed while at the same time manufacturing capacity has been dramatically enlarged, leading to cheaper batteries thanks to economies of scale. A123 is re-entering a market that appears to be opening up, and it is doing so in an environment with fewer competitors. A123 couldn’t have picked a better time for its mythic rebirth.
Tags: Advanced Batteries, China, Clean Transportation, Energy Storage, Mergers & Acquisitions, Smart Energy Practice
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