Tight Supply of Battery Winders Could Limit EVs, Analyst Says

It takes 250 machines to support production of 750,000 EVs. Last year, CKD, a leading supplier, sold nine.

TOKYO – While electric vehicles and lithium-ion batteries are a major theme of this year’s Paris auto show, a Tokyo analyst warns of a possible bottleneck in the supplier sector so far largely gone unnoticed – a production capacity shortage for lithium battery-winding machines.

Morten Paulsen, machinery analyst for CLSA Asia-Pacific Markets, warns half of global capacity for these machines is in Japan and most of that from a single supplier in a Nagoya suburb.

The company, CKD Corp., sold nine units in fiscal 2009 and is on track to deliver another 25 this fiscal year ending March 31, 2011. According to Paulsen, the company hopes to produce 250 units by fiscal 2013.

“Each machine can make lithium cells for 3,000 electric vehicles,” he says. “Thus, 250 machines can support production of 750,000 units annually.”

Time will tell whether the supplier can meet its 2013 target and whether there even will be demand for 250 machines, as industry EV and plug-in hybrid-electric vehicle forecasts vary widely.

One of the more bullish, by J.P. Morgan Securities Japan Co. Ltd., estimates demand will grow to 1.1 million units in 2013, then double again two years later to more than 2.6 million.

It is not clear who will join CKD to fill these orders, although in Japan its main competitor is believed to be a small company near Kyoto, Kaido Mfg. Co. Ltd. Reportedly among Kaido’s customers is Hitachi Automotive Systems Inc.

Outside Japan, Arcotronics Technologies srl, an Italian machinery maker based in Bologna, is considered a key rival.

Performance results announced last week at electronics exhibition CEATEC Japan by Nissan Motor Co. Ltd., a CKD customer, raise questions about the auto maker’s Leaf EV due to go on sale in December.

Mitsuhiko Yamashita, Nissan’s executive vice president-research and development, discloses the Leaf covers only 47 miles (76 km) in traffic jam conditions – at 6 mph (10 km/h) – when in 90º F (32º C) temperatures with the car’s air conditioner engaged. This is less than half of the Leaf’s 100-mile (161-km) average.

Similarly, at 32º F (0º C) with the heater turned on, the car’s range falls to 68 miles (109 km).

Yamashita warns that more extreme temperatures, strong headwinds and hilly roads will all result in shorter distances.

An added problem is whether a small-cap company such as CKD, with annual sales of just ¥50 billion ($608 million), can finance this huge buildup of production capacity. Moreover, the company reported a miniscule profit in the most recent fiscal year of ¥300 million ($3.6 million).

Paulsen says “winding is especially critical to achieving cell uniformity. It is a high-precision technology that the Japanese are good at and that China doesn’t possess.”

He notes that Li-ion battery cells are wound by hand in China. “Apart from being dangerous because workers are exposed to chemicals, one faulty cell could lead to overheating and possibly fire,” he says, referring to Sony Corp.’s recall of laptop batteries several years ago.

Paulsen contends it is still too soon to confirm long-term durability of Li-ion batteries used in EVs and PHEVs produced, for instance, by BYD Auto Co. Ltd.

CKD would not confirm its customers, but sources claim the supplier has delivered winding machines to GS Yuasa Corp. Through joint ventures with Mitsubishi Motors Corp. and Honda Motor Co. Ltd., GS Yuasa supplies the Li-ion battery for the Mitsubishi i-MiEV electric car and will produce the battery for the Honda Civic Hybrid next spring.

CKD also is reported to have sold winding machines to Nissan, Toyota Motor Corp. and battery maker A123 Systems Inc.

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