DETROIT - Battery maker GM Ovonic faces what looks like an impossible challenge. The company plans to produce nickel-metal hydride batteries for electric vehicles this summer.
But its battery is too expensive; a competitor has already gone into production; and other advanced batteries may outperform GM Ovonic's product.
GM Ovonic President John Adams has a deadline. The US Advanced Battery Consortium will not fund further Ovonic research beyond this year, so Adams must find a market for the battery.
'Now we've got to make this work,' says Adams.
The electric-vehicle industry's biggest problem is that research grants have produced many innovations, but a market for these vehicles barely exists.
Investors are cautious. 'Because their revenue lags behind up-front costs, you would view this as a speculative investment,' says David Andrea, an analyst for Roney & Co., a US investment firm.
GM Ovonic's parent company, Energy Conversion Devices, has seen its share price fall by two-thirds over the past year. Energy Conversion Devices owns 60 percent of GM Ovonic, General Motors the remainder.
GM Ovonic was set up in 1994 because the battery's creator - inventor Stanford Ovshinsky - needed money and know-how to commercialize his product.
Before he joined GM Ovonic, Adams was chief engineer of manufacturing for GM's Delco Remy division in Indianapolis. Adams started his career as a college intern at Delco's battery plant in Muncie, Indiana, more than 30 years ago.
Adams says he has five years to develop a market. After that the battery program's corporate sponsors may withdraw their support. But Adams remains confident. 'We have to be creative. I am starting to see the light at the end of the tunnel.'
GM Ovonic's first big test is later this year. GM announced last December that it wanted to install nickel-metal hydride batteries in some EV1s this fall.
Adams says that to succeed, GM Ovonic must overcome four challenges:
Weak demand. Over the next five years, automakers are unlikely to sell more than a few thousand electric vehicles. The result is that battery makers will not generate savings from high-volume production.
High cost. A hand-built GM Ovonic battery pack costs about $60,000. During pilot production, Adams hopes to cut that price to less than $9,000. However, that is still about twice the battery consortium's original cost target.
Tough competition. GM Ovonic must compete with Matsushita Electric Industrial Co., a Japanese manufacturer with very deep financial reserves
Better technology. The GM Ovonic battery could be overtaken by the lithium battery. Potentially, this offers great range and lower cost. Sony Corp. has developed a lithium battery for Nissan Motor Corp.
The battery consortium has identified lithium as a promising long-term technology. The nickel-metal hydride battery has only one advantage: It's available now.
Moreover, the battery has demonstrated its potential. Last year, a Solectria Corp. car powered by GM Ovonic batteries ran 600km on one charge. Under ordinary driving conditions, the GM Ovonic battery can deliver a range of 160-200km, easily surpassing conventional batteries.
The GM Ovonic battery should last four or five years before being replaced. Most lead-acid batteries last two years.
Nickel-metal hydride batteries meet or approach all but one of the battery consortium's performance goals. The single failure is cost.
Adams hopes to solve that problem this summer. In a small plant in Troy, Michigan, he is installing machinery to replace the workers who assemble prototype batteries by hand. The plant is one tenth the size of a production plant. If Adams can reduce costs enough, GM Ovonic will build a full-scale plant in Ohio.
Until then, however, employees in Troy make the batteries by hand.
To mechanize the first production steps is quite simple. The last step is the most difficult. GM Ovonic must charge and discharge the prototype batteries repeatedly before shipping them. The process causes a chemical reaction which prepares the battery for regular use. This currently takes up to 14 days, although Adams says he can cut the process to three days.
Target: $4,500 battery pack
Costs are also high because the battery pack uses expensive materials. These include titanium, zirconium and nickel hydroxide. Adams says he can reduce the amount and cost of the metals in each battery.
But Adams accepts he may never achieve the consortium's goal of $4,500 for an EV1-sized battery pack.
That could be a big problem when GM Ovonic markets the battery, says John Wallace, director of Ford Motor Co.'s alternative vehicle program and a consortium spokesman. 'We think we can get the cost down, but not nearly as much as we need,' says Wallace.
In 1999 Ford hopes to sell 400 electric Ranger pickups equipped with nickel-metal hydride batteries. Wallace wants to encourage competition among battery makers, and says he is impressed by Matsushita's battery.
'They have a good product, and we are considering it,' he says.
Honda is also encouraging competition. The automaker is buying Matsushita's nickel-metal hydride batteries for the EV Plus coupe, which went on sale last month. But Honda is evaluating GM Ovonic's battery too.
Adams says he is hopeful, but declines to predict whether GM or Honda will be the first customer. GM has said it will use nickel-metal hydride batteries in some EV1s. But a company executive has told Saturn dealers in California not to expect the advanced battery in large volumes.
Test fleets on the road
Sony's lithium battery for Nissan is 'very impressive,' according to Wallace.
Seven major US automakers have agreed to put small fleets of electric vehicles on California's roads. They did so as part of a deal with state regulators, who dropped their requirement that electric vehicles amount to 2 percent of all new vehicles sold in California, starting in 1998.
In return the California Air Resources Board offered extra credit to automakers that sell vehicles equipped with advanced batteries. This gave carmakers an incentive to buy nickel-metal hydride batteries. But other customers may be less generous.
To reduce costs Adams has tested smaller, cheaper battery packs. Last fall, GM Ovonic equipped a Solectria car with a 15-battery pack, rather than the usual 25 batteries.
The car averaged 170km at 70kph. When the driver used the air conditioning during typical stop-and-start driving the car's range was significantly less.
Recycling offers cost savings. After the used batteries are removed from cars, the batteries could be sold to factories, hospitals or schools that need backup sources of power.