Hybrid Car Batteries in Demand

Explosive growth in the number of hybrid gas/electric vehicles manufactured and sold in coming years may strain makers of the expensive battery packs that help power them.

With relatively few hybrid models on the market, the three major suppliers of the batteries – Japan’s Panasonic and Sanyo and U.S.-based Cobasys – may have enough production capacity to meet automakers’ current plans over the next few years.

But without expansion or more players coming into the market, batteries could be in short supply three or four years from now when more automakers expect to begin selling hybrids.

Suppliers seem unable to quickly add production. Ford Motor Co. has already complained that Sanyo, supplier for the hybrid version of the Escape sport utility vehicle, can’t build enough batteries. The hybrid Escape went on sale in September. Ford expects to build 20,000 for the 2005 model year but would like to build more.

The company is in talks with Sanyo about boosting production. It also is talking with other hybrid battery makers to get more supply.

Automakers hope that the growing popularity of hybrids will entice other companies to build the battery packs, increasing competition and ultimately reducing the price, which now can run as high as $5,000.

Added competition is likely, says Brion D. Tanous, an equity research analyst at Merriman Curhan Ford & Co. in San Francisco.

“Over the next three to six months, you will see a flurry of announcements of what battery companies have design contracts and what hybrid vehicles are coming from the automakers,” he said.

Toyota and Honda have been the early players in the hybrid market. Honda was the first automaker to introduce a hybrid in the United States when it launched Insight, a small two-seater, in December 1999.

J.D. Power and Associates estimates that by 2007, about 410,000 hybrid vehicles will be sold in the United States, up from an estimated 70,000 this year and about 47,500 in 2003.