According to a report from Bloomberg, a looming price cut stemming from oversupply in the rechargeable battery industry, may make electric vehicles more affordable, but could drive small-scale lithium-ion battery producers right out of the market. Panasonic Corp. and Samsung SDI Co., the world's largest producers of rechargeable batteries, are expected to engage in a price war as oversupply of li-ion batteries continues to worsen.

"Lithium-ion battery prices may tumble 19 percent in 2010, the biggest drop in five years," one industry analyst told Bloomberg, while another noted that "the worsening oversupply may push prices down as much as 25 percent." This drop indicates that some of the big players in the li-ion market are willing to sacrifice profit for market dominance. With sales of electric vehicles expected to take off soon, lithium-ion battery demand could explode to triple its current volume in just six years time.

Mitsushige Akino of Ichiyoshi Investment Management Co. offered this insight into the future of the li-ion industry:
Battery makers will probably go through a tough time with falling prices. The business may become lucrative only for a couple of companies with dominant market share. Others may never be able to make money.
Which companies are expected to gain a dominant market share? Well, the South Korean battery makers such as Samsung and LG Chem, with their ability to source cheap materials and quickly increase production capacities, should hold the upper hand over Japanese rivals like Panasonic. But, we wouldn't drop the Japanese companies from the list of dominant battery makers just yet. Akira Kadota, a spokesman at Osaka-based Panasonic, outlined the company's commitment to compete with South Korean battery producers:
We anticipate the harsh price competition with South Korean makers will continue. We are reviewing our production process to strengthen our cost competitiveness so that we can win the battle.
Oversupply, price wars and fierce competition could rip apart the industry, leaving just a handful of battery producers around. This game of constantly lowering prices is eroding profitability and will eventually cease, but which companies will survive?

[Source: Bloomberg]

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