WARNING to electric carmakers and lithium ion battery manufacturers: it's suggested you stay away from taking equity stakes in each other's companies. Practicing this type of electric-vehicle keiretsu could lead to harikari.

In an Automotive News commentary, Dave Guiliford analyzed two examples of such investment alliances that haven't gone so well. In 2010, battery maker A123 Systems took a $20.5-million stake in Fisker Automotive and supplied the battery systems for the first (and thus far only) Fisker car, the Karma. In 2007, Ener1 took a 31 percent stake in Norwegian EV maker Think and signed a contract to supply lithium ion batteries for the Think City electric car. As part of that deal, Ener1 CEO Charles Gassenheimer became chairman of the Think board.

Initially, these partnerships seemed to make sense. If these types of partnerships worked well together, it could be similar to what's called keiretsu in Japan, where suppliers become an important part of the supply chain for automakers and long-term, successful partnerships are forged. On the other side of the coin, taking such investment risks can end poorly. As Guiliford wrote, "Tying a small, new-tech supplier and a small, new-tech automaker compounds the risk that each company has."

Both Ener1 and Think have entered bankruptcy following Think's disappointing sales of the City. A123 has written down its investment in Fisker by nearly half and cautioned, in its first-quarter report, that it could be at risk from lower-than-expected orders from Fisker. Fisker is struggling to bring its second plug-in hybrid, the Atlantic, to market.

The lesson? Taking equity links can sometimes be a shrewd move for automotive partners. It can also be like rearranging deck chairs on the Titanic.


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    • 1 Second Ago
  • 11 Comments
      Sasparilla Fizz
      • 2 Years Ago
      It's always good to remember GM taking that stake in NiMH technology for the EV1 - which allowed them to have patent control and then when they decided they didn't want to do EV's they could sell those patents to an oil company (Phillips at the time I believe), as the poor NiMH creators watched in horror, so nobody else who might want to do EV's could use NiMH on EV size batteries again.
        Marcopolo
        • 2 Years Ago
        @Sasparilla Fizz
        Sasparilla Fizz Um, I'm sure you're right......but if so, could you explain how Toyota,Vectrix and others, obtained their NiMH batteries ? Or could it be that NiMH technology was simply superseded by Lithium ?
          Marco Polo
          • 2 Years Ago
          @Marcopolo
          Sasparilla Fizz It's ok if you can't, but just stop repeating that old conspiracy theory. Technology does get outdated, and superseded, no matter who owns it. It doesn't need to be a conspiracy.
      Rotation
      • 2 Years Ago
      Taking equity is always risky. But Nissan owns part of Calsonic and their battery partnership AESC and those seem to be working.
        JakeY
        • 2 Years Ago
        @Rotation
        I think the article is talking about when both companies are new. The Nissan/NEC and Mitsubishi/GS Yuasa JVs are among established companies.
      2 Wheeled Menace
      • 2 Years Ago
      How about this: Battery manufacturers, just sell to whoever wants to buy. Car makers, just buy from whoever has the best product. These exclusive deals don't benefit the consumer, and sometimes they hurt the seller as well. Just think about this; who won the PC wars back in the 80's-90's... IBM and all their suppliers, or the IBM clone makers? Would Intel have been so successful if they had not sold their processors to anyone but IBM? I think we're re-learning the old lessons of the computer industry here1
      Spec
      • 2 Years Ago
      These equity deals were not the problem. The problem is that the EV biz just is not catching on as fast as they would like because oil has remained relatively cheap, EVs have remained relatively expensive, and range/recharge-time. The Think City at $42K was a non-starter. The Fisker at $100+K was a fire-starter.
      Roy_H
      • 2 Years Ago
      Enerdel was desperate, they couldn't find any buyers for their high priced ordinary lithium batteries. They took the risk of buying a portion of Think in order to have a captive customer. Think was then forced to pay a premium for its batteries and thus markeded their car at higher than intended price. This was a disaster that I recognized when first announced, as I am sure many other observers did. Fisker and A123 is not the same situation at all. Most importantly, A123 is making premium batteries and has other customers besides Fisker. Fisker has brought the Karma from conception to delivery in record time, and as such has, I believe, skimped on extensive testing before handing cars over to customers. Flaws they could have found and fixed quietly are now being found by customers in a very public way. Fisker and A123 have fixed these problems but at high cost both in cash because these cars are already in customer's hands and in reputation. Their problems are each their own, and not a result of partnership.
        NotTarts
        • 2 Years Ago
        @Roy_H
        'Most importantly, A123 is making premium batteries and has other customers besides Fisker. ' Fisker does, however, account for nearly 30% of A123's revenue.
      Nick
      • 2 Years Ago
      Pardon me but, this is like saying marriages end poorly, because two of your friends unions ended in divorce. It's a young industry, many are going under and a few will survive, it's normal.