* A123 says Chinese bus market attractive in short term
* Says reducing cost of batteries key to growth
(Adds executive comments, details, stocks price and byline)
By Poornima Gupta and Alison Leung
SAN FRANCISCO/HONG KONG, Dec 17 Lithium-ion
battery maker A123 Systems Inc AONE.O said on Thursday it is
forming a joint venture with China's top carmaker SAIC Motor
Corp (600104.SS) to sell battery systems for electric vehicles
in the world's largest automotive market.
A123's joint venture with SAIC would build complete vehicle
traction battery systems for hybrid electric, pure electric
passenger vehicles, and heavy-duty truck and buses in China.
"This is a major commitment to the Chinese market," said
Jason Forcier, who leads A123's automotive division, in an
interview. "We are looking to be basically the market leader in
China, both in the truck and passenger car market."
Following the news of the announcement, shares of the
Watertown, Massachusetts-based company, which debuted on the
Nasdaq stock exchange in September, closed up 6 percent at
The venture, called Shanghai Advanced Traction Battery
Systems Co, would be owned 51 percent by SAIC and 49 percent by
A123 Systems, according to the companies.
Forcier said the Chinese bus market was an attractive
segment for the company in the short term, given the government
support for electricity-powered buses.
The passenger car market was much more lucrative in the
long term, he added.
Forcier said A123 Systems is expanding its presence in
Europe and in discussions with companies in India.
A123, which won a $249.1 million grant in August from the
U.S. Department of Energy, will start production at its first
U.S. battery plant in mid-2010.
The automotive market for lithium-ion batteries, mostly
found in mobile phones and computer laptops, is projected to be
$32 million in 2009 but is expected to skyrocket to $22 billion
in 2015, according to A123's prospectus.
Every major global automaker has plans to bring electric
vehicles to the market in the next two to three years.
Forcier said bringing down the cost of battery systems is
the major challenge going forward.
"Cost is the real driver in this market," Forcier said,
adding that he is confident A123 will be successful in bringing
down the cost of batteries by as much as 35 percent in the next
Analysts estimate that cost of battery systems for electric
vehicles or plug-in hybrids can range from about $8,000 to
A123, founded by scientists linked to the Massachusetts
Institute of Technology (MIT), is currently working with German
luxury carmakers BMW and Daimler, U.S. automaker Chrysler and
France-based Renault. It also has relationships with suppliers
like Delphi and Magna Steyr.
The new venture of A123 with SAIC has been awarded a
contract to supply battery systems for SAIC's plug-in hybrid
SAIC had plans for a hybrid Roewe 750 sedan and a plug-in
hybrid version of the Roewe 550, which could cut fuel
consumption by 20 percent and 50 percent respectively. Both
models would utilize A123 battery cells.
The Chinese carmaker planned to launch electric vehicles
for sale in 2012.
(Reporting by Alison Leung; Editing by Chris Lewis and Carol