By on August 8, 2012

Troubled battery maker A123 is getting another lifeline. This time, from China. Wanxiang Group  will invest as much as $450 million in the company, says Reuters. Wanxiang, one of the largest Chinese auto component makers.  A123 will soon be Chinese.

A123, which received a $249 million grant from the Obama administration as part of a program to develop advanced lithium-ion batteries, said last month that it only had four or five months until its money would run out. A123, which had big plans for the EV industry, reported a second-quarter net loss of $82.9 million on $17 million revenues. Does not sound like the best business. Wanxiang seems to have a different perspective. Says the Wall Street Journal:

“The proposed agreement includes plans for Wanxiang to obtain convertible notes and warrants that if fully exercised could give it an 80% stake in A123. The deal is expected to close by year’s end.”

When we reported about AS123’s cash crunch, TTAC correspondent Jellodyne said:

“Romney would have closed ‘em down, sold the parts (to overseas companies) and bought the batteries from China. That’s just good business sense.”

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16 Comments on “A123 Becomes Chinese – Faster Than Imagined...”


  • avatar
    BigFire

    At this burn rate, A123 should go through Wanxiang Group’s investment in about 4.5 quarters. So by next Christmas, they’ll be back right where they are now.

  • avatar
    DeadWeight

    The big risk here- and what will determine if Wanxiang Group (and the Chinese Government agency that is in charge of EV suppliers) is making a long-term profitable investment- is whether lithium ion is at least one of the eventual standards upon which mass marketed, affordably priced, range anxiety-free electric vehicles are powered by.

    There’s a lot of flux, volatility and unknowns in the EV market as of now, and as technologically intense sectors of economy and market are inclined to do, there may be radical breakthroughs in certain technologies or even new technologies advanced that make the current ones antiquated, at best, and rendered meaningless, at worst.

    Even if I was among the most competent of engineers and/or scientists working in the field of electric vehicle batteries or electric vehicle platforms, I doubt I’d feel confident enough to project what the standard technology for powering EVs will be in 5 years, let alone 15.

    • 0 avatar
      Robert Schwartz

      I am confident that the BEV market in 15 years will be just what it is now, and what it was 15 years ago. BEVs are obsolete technology that no amount of pixie dust is going to resurrect.

      • 0 avatar
        Luke42

        And you’re confidence is based on what, exactly? Conservative political ideology?

        I’m confident that I will own an EV in 15 years. In fact, I’ve test driven a pure EV (the Nissan Leaf) and a plugin hybrid (the Chevy Volt), and car dealers in my town out here in flyover country — I loved them both. If I ever buy a new car, these cars are at the top of my list. The Volt did a very nice job of justifying the high price with both technology and comfort, and the Leaf was irrationally charming.

        While you’re over there asserting that EVs are pixie dust, I’m out there driving them. I may not buy a new car this year, but I probably will buy a new car in the next 15 years, and any car that’s worth new-car money to me will likely have a plug.

  • avatar
    NormSV650

    Obummer!

  • avatar
    Crosley

    So glad we have such a brilliant venture capitalist as our President.

    • 0 avatar
      Luke42

      A123 was on the scene and making a name for itself long before Obama was elected president.

      • 0 avatar
        Crosley

        Then why did it need $249 million in taxpayer funds?

        I’m sure this grant had NOTHING to do with political donations.

        Oh wait:
        http://bostonherald.com/news/regional/view/20220329battery_co_juiced_up_pols_coffers_donated_thousands_before_receiving_249m_in_fed_funds

      • 0 avatar
        Luke42

        They had a real product with good specs that was used by everyone from R/C models to EV prototypes.

        A company that has a real product that oversteps is bounds in terms of growth and politics is way different from what you’re implying A123 is. I’m not saying that political and business missteps are excused, but I am saying that reality has more substance than the partisans want to acknowledge.

  • avatar
    redmondjp

    Methinks they are buying into this to obtain the IP, with offshoring of the manufacturing to occur within a couple of years. Just another step in the global race to the bottom.

    • 0 avatar
      Robert.Walter

      Share these concerns.

      I hope if there are any underlying govt licenses for ip out of, e.g. DOE or Sandia, that they are nullified by such a change of control. The know-how on such batteries likely has applications for things outside automotive (read Military.)

    • 0 avatar
      highdesertcat

      “Methinks they are buying into this to obtain the IP, with offshoring of the manufacturing to occur within a couple of years.”

      Exactly! That’s the prudent thing to do when, like China, you’re flush with cash. Buy the IP rights and then move production back to China where production costs are going to be much lower than the US, while at the same time cornering a little piece of that market for a future ROI.

      Smooth move.

  • avatar
    Robert.Walter

    We had business dealings with the Wanxiang Group about 10 years ago … this was not one of my projects, so I am not deep in the details … we were considering using them for metal-forming work in China as a supplier of sub-components for our assembly work there (and possibly for export to some of our other international locations) … part of the deal would have been – can you believe it!? – that we would show them certain techniques to improve the quality and profitability of production … basically help them up their game dramatically … one quality responsible colleague paid a visit there to evaluate their capability … he recalled seeing a huge room in their HQ lobby dedicated to the history of the group, showing how they had, in a few short decades, transformed themselves from a garage operation to a major automotive component supplier within China. His summary: “at the rate they are going, and the rate we are going, they will own us in about 10 years …” This has not yet come to pass, but I still see it as possible with good probability … but in the meantime, they have bought up quite a few US-based automotive assets.

  • avatar
    ranwhenparked

    This is a reason why its always risky trying to artificially create winners and losers. All the free money in the work can’t magically make an unsound business model work, it just prolongs the inevitable. A123 can’t survive without a wealthy sugar daddy there to prop it up and hold its hand for a very long time, and it may have just found one (at least for as long as it takes for Wanxiang to get whatever IP they want out of it, or lose patience with continuing losses, whichever comes first).

  • avatar
    carbiz

    … start learning to say, “Would you like fries with that,” in Mandarin.


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