Boston-Power hopes to get a $100 million federal loan to open its first factory in the United States to produce automotive lithium-ion batteries.
The Westborough, Mass.-based based startup started shipping its "Swing" batteries to automotive customers this quarter, but who those customers are won't be revealed until product launches, said Christina Lampe-Onnerud, CEO of Boston-Power, in an interview.
"The company has succeeded in portable electronics, and now we have multiple partnerships in the emerging transportation segment," Lampe-Onnerud said. "There is just a flurry of activities." The company is hosting Massachusetts Gov. Deval Patrick and other political bigwigs at its new factory site in Auburn on Monday.
The company, founded in 2005, outsources production to GP Batteries, which has dedicated a factory in Taiwan that is churning out "millions of cells per month," she said. It scored a deal with Hewlett-Packard to provide batteries for laptop computers, a deal announced only last December.
The contract was a big deal for a startup company, whose competitors in the computer market include long-time battery companies such as Sony. Boston-Power will face tough competition in the transportation industry as well.
Lampe-Onnerud said in previous interviews that her company would enter the automotive field, possibly around 2010. Boston-Power set up a lab to develop automotive lithium-ion batteries last October, she said.
The company makes prismatic cells, which are flat compared to the cylindrical cells commonly found in portable consumer electronics and power tools. A General Motors' executive said earlier this year that the company picked LG Chem to supply lithium-ion batteries for the plug-in hybrid Chevy Volt partly because the Korean firm was further along in developing prismatic cells, while contender and startup A123 Systems was still doing mostly cylindrical cells (the risk of working with a startup was another reason).
Winning over automakers is tough, considering that the time it takes from design to manufacturing could take six years or more. There also is intense competition among established and up-and-coming tech developers all vying for major auto companies' attention.
The push by U.S. lawmakers to design and produce more fuel-efficient vehicles, including plug-in hybrids, over the past year has created good funding and sales opportunities for companies developing products that could make cars run more miles with less fuel. President Obama also recently directed federal agencies to set a tougher fuel economy (see Obama Proposes Higher Fuel Standards, Appeases California and Auto Industry).
Lithium-ion batteries have become the power storage of choice for plug-in hybrid and all-electric cars. But most lithium-ion batteries are made for consumer electronics, and are made in factories located mostly in Asia and Europe.
Boston-Power is angling for the $100 million from the battery grant program created by the American Recovery and Reinvestment Act, which Obama signed into law in February this year. The company could find out if it would get the federal grant around July, Lampe-Onnerud said. The state of Massachusetts also plans to kick in up to $9 million to help the startup open the factory in Auburn, near Boston-Power's headquarters.
The two sources of funding won't be enough to set up the planned 455,000-square-foot factory, said Lampe-Onnerud, who declined to disclose the total costs. The company plans to lease the factory space to save money, she added.
The startup said it also is applying for other federal dollars under the Defense Production Act, which encourages domestic manufacturing of goods that would serve national security interests. Boston-Power has raised $125 million in venture capital since its inception. Investors include Foundation Asset Management, Oak Investment Partners, Venrock, GGV Capital and Gabriel Venture Partners.
Massachusetts joins other states in offering incentives to promote lithium-ion battery manufacturing. In April, Michigan announced it would give $543.5 million in tax credits to four battery makers such as A123, LG Chem and Johnson Controls-Saft, a move crucial for rescuing the state's faltering automotive businesses.
Whether various federal and state efforts could jumpstart a domestic battery industry and keep it going remains a big question. For one thing, manufacturing can be done more cheaply in Asia.
Lampe-Onnerud said her company has no plan to shift manufacturing from Asia to the United States. But she contended that the United States could make cost-competitive products.
"I don't know if that's always true," said Lampe-Onnerud about Asia's low-cost manufacturing claim. "We have a very high-tech and automated facility."
Boston Power typically makes its lithium-ion cells and assembles them into battery packs for the consumer electronics market. For the automotive industry, the company could provide the cells only. A battery system in a hybrid or pure electric car comes with electronics and software to control the charging.
Electric carmaker Tesla Motors, for example, buys lithium-ion cells primarily from Japanese companies and makes its own battery systems (see Can Tesla Impress the Masses?).