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Buying & Leasing a Car

Hybrid Cars' Foreign Dependence

The bright future of plug-in hybrids has a dark shadow: Nearly all of their batteries will be imported.

U.S. businesses are losing the race to make rechargeable auto batteries that are must-haves to build plug-in hybrid cars. The hybrids are a linchpin of Detroit automakers' strategy to break out of their sales funk and comply with tough clean air laws coming down the pike. But because U.S. firms were asleep at the wheel, the nation may just end up switching from foreign oil dependence to relying on non-U.S. battery makers.

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Japanese and Chinese manufacturers are set to sew up the market for mass-producing lithium ion auto batteries that will provide sufficient power for most motorists to make daily commutes without burning any gasoline. Long trips will require only an occasional stop at the gas pump: Hybrids get the equivalent of 100 miles per gallon. A gaggle of Asian firms, including Japan's Panasonic, Matsui, Sanyo and Sony; South Korea's Samsung; and China's BAK Battery, BYD Co. and Lishen Battery, have a near lock on the advanced technology required to make the batteries. China's largest battery manufacturer, BYD, which also is an automaker, expects to sell the world's first plug-in hybrid production model vehicle by year-end and has set sales for Europe and Israel by 2010.

This is double-barreled bad news for Detroit's automakers. Japanese car companies are doing a flurry of deals to corral mass production deals for plug-in auto batteries in time for them to roll out electric models by around 2010. Toyota's deal with Matsushita Electric Industrial Co. assures the world's second largest automaker plentiful supplies of lithium ion batteries in a little over a year.

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Meanwhile, there's no advanced battery industry in the U.S. -- no big manufacturing facilities or suppliers for the metals and raw materials needed to produce the batteries to make plug-ins operate. In fact, the U.S. relies on foreign suppliers, especially China and Chile, for most of the lithium now used in the chemical and pharmaceutical industries. About the only major activity on this front involves Massachusetts' A123Systems and Germany's Continental AG delivering prototype batteries to General Motors’ European test facilities.

There’s a real risk the U.S. will swap a battery cartel for the oil cartel, cautions Mary Ann Wright, chairman of the auto systems supplier Johnson Controls-Saft. Detroit's automakers aren’t bolting out of the blocks so far, other than making an $8.2-million grant to Johnson Controls-Saft to develop rechargeable battery models and electronics. The grant was made through an industry-run battery consortium -- started some 10 years ago with not much to show for itself yet -- that gets funding from the Detroit automakers. Wright, who formerly headed Ford's hybrid vehicle development program, warned executives at an automotive executive conclave in August that time is running short to develop a domestic lithium ion battery industry.

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It’s not as though there’s a debate over whether the industry is headed toward more electric cars, which that means securing large supplies of lithium ion batteries will be a critical issue for Detroit. The automakers are already being forced to boost fleets' average fuel efficiency to 35 miles per gallon by 2020, a 40% jump. The auto companies also don't want to be caught flat-footed by enactment of carbon dioxide (CO2) emissions restrictions by Congress. Lawmakers are inching toward them and may enact such restrictions as soon as next year. Although carbon caps will be phased in over several years, Detroit carmakers and their foreign cousins fret that their vehicles will have to exceed 35 mpg fuel efficiency to slash CO2 tailpipe emissions.

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U.S. electric utilities stand to be dependent on Asian batteries, too. Those companies will soon be under the gun, just like their auto-making brethren, to slash power generators' emissions and will have little choice but to utilize wind- and solar-made electricity. The problem is that wind and solar generators often make electricity when it's least needed. "There's intense interest on the part of [utilities] to use the millions of plug-in cars that could eventually be in service as electric storage devices," creating incentives for consumers to sell power stored in their cars to the grid during peak usage times when prices are high and recharge at night, when electricity prices are low, says David Cole, chairman of the Center for Automotive Research, an auto industry consulting firm.

So far, there's only yammering about forming a U.S.-backed advanced battery program, such as the 1980s-era Sematech, the industry-federal partnership that helped revive domestic semiconductor production. The idea will get a lot of talk early in the next Congress, but there is no assurance it will gain any traction.

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