Irony scene: The US discovered and nurtured a battery startup but let it slip, now suffering from being on the edge of the electric vehicle supply chain, having to go to China to learn how to do it.

On a 3-mile stretch of farmland in southwestern Michigan, Ford Motor is building a battery factory. The technology Ford needs to produce stable, cheap batteries to power electric vehicles will come from China’s Amperex Contemporary Technology Co., Ltd., also known as CATL, the major battery maker and best of the world.

Ford’s deal with the Chinese giant will see it receive a $3.5 billion investment in a 232,000-square-foot plant, thousands of new jobs, and the ability to produce enough batteries annually to power it. for 400,000 vehicles when the plant opens in 2026. But for anyone who knows the matter well, it could be a moment of devastating irony for America when the deal could have turned out the way it should. other!

In the mid-1990s, a compound called lithium iron phosphate (LFP), the main battery chemical now used by CATL and most battery companies in China, was discovered by scientists at the University of Texas at Austin. Austin was discovered and commercialized a few years later by start-up A123 Systems LLC in Watertown, Massachusetts. In 2009, the A123 was awarded hundreds of millions of dollars by the Obama administration with the great hope of helping to start the production of electric cars in the US. But it was too early and there was no need for electric vehicles, plus car companies that made vehicles that used less gas were reluctant to risk relying on an unproven startup.

By 2012, A123 had filed for bankruptcy and became a symbol of government waste often talked about at the same time as Solyndra, a California solar panel maker that filed for bankruptcy in 2011. after receiving a federal loan guarantee worth half a billion dollars. To this day, Dave Vieau, the former chief executive of A123, still occasionally waves when people know he runs the company. “You are the A123 guy who stole all the government money”, is a quote he has received more than once.

Now, nearly 30 years after the discovery of LFP, the US is still working to build its own battery supply chain, and the pioneer of the modern assembly line is now turning to China to learn how to make it. engine of the 21st century. It is a puzzling reminder that America has learned the wrong lesson from the A123.

Instead of letting a potentially disruptive technology, or a fledgling company trying to commercialize it, live or die on the whims of the free market, the United States could have committed to participating. a much longer game. And instead of letting a battery invention fall into the hands of today’s biggest economic and geopolitical rival, the United States could have found a way to nurture and protect a fledgling industry that is certain to face a stalemate. test and then fail.

In 2013, China’s then-largest auto parts company bought the A123 to get out of bankruptcy. That year, the Chinese government also began to implement a plan to build the domestic electric vehicle market at breakneck speed. A decade later, China accounts for 58% of the world’s electric vehicle sales and 83% of total lithium-ion battery production.

Even if all of President Joe Biden’s climate policies succeed in reviving US manufacturing, the US is still at least a decade behind China, industry experts say. when it comes to battery production, both in terms of technology and required capacity. “China has moved forward with a very consistent strategy over the past 20 years,” said Brian Engle, president-elect of NaatBatt International, a trade association that advocates for battery development in North America. Meanwhile, we (meaning America) made all kinds of really great technology, and then we gave it up.”

Shortly after the collapse of the A123, some of its engineers responded to the call of China’s nascent and booming battery industry. One eventually became the billionaire chairman of a Chinese carbon materials manufacturer.

Some former A123 executives still wonder what would happen if, at that point, the US found a way to keep the company afloat – a government supply contract or even a sale. another American business. With time and support, can the A123 eventually become the multibillion-dollar US battery giant, a mainstay in the domestic battery supply chain?

GROWING FEMALE

In early 2001, a 26-year-old businessman named Ric Fulop began knocking on the doors of the Massachusetts Institute of Technology, hoping to find someone to help him start a battery company. One of those who responded was Yet-Ming Chiang, a professor of materials science, who invited his doctoral friend from Cornell University, Bart Riley, to see them regularly. They narrowed down the idea of ​​a “self-assembled battery”.

Batteries have three basic components: two electrodes – the cathode and anode – that store and release an electrical charge, and an electrolyte that helps to transport the charge between them. The materials used to make batteries determine the amount of energy they store at cost. Chiang’s dream was to find three materials that, under the right conditions, would fall into the exact structure of the battery.

That summer, they hatched the A123 and quickly raised $8 million, along with hiring Vieau, an executive with a Rhode Island electrical appliance company, as CEO. But six months later, the team realized that making self-assembled batteries a reality would take a long time. Meanwhile, Chiang’s lab was publishing scientific papers on LFP as a superior material, and he convinced Vieau that A123 could use it to pursue an alternative commercial battery.

LFP was discovered by a team of researchers led by Professor John Goodenough in 1995. Goodenough, who won the Nobel Prize decades later, assigned researchers in his laboratory at UT Austin a Mission: Get a lithium-ion battery and swap out different metals to see if they can hold more energy without catching fire.

Goodenough’s team chose an iron and phosphorus compound and created a test product. When they charged it, the compound formed an atomic crystal structure that could easily move lithium ions back and forth. They stumbled upon a new cathode material, one that has proven to be cheaper and more stable than existing technology.

Initially, the LFP battery charges and discharges slowly. Scientists affiliated with a Canadian power company have solved that problem by coating LFP cathode particles with carbon, an innovation that could make the material commercially viable. . Around the same time, Chiang published a paper in the scientific journal Nature Materials, stating that “doping” an LFP cathode, or injecting small amounts of a metal compound, includes an element called an element called an LFP. niobium, which helps electrons move faster so the battery can produce more instantaneous, even power. This discovery, which A123 would later name “Nanophosphate,” became a key innovation for the company, allowing the battery to instantly generate two or three times more energy than any other battery of its size. other similar size on the market.

The A123 doesn’t take long to find applications for it. Within a few years, the startup had contracted Stanley Black & Decker to supply batteries for a new line of power tools and raised an additional $32 million. Looking at the 18-month term with limited funds, A123 decided to outsource in lower-cost countries.

They hired a company in Taiwan to manufacture electrodes and batteries, then moved the electrode production to Korea. China, which is racing to catch up with the electronics manufacturing capabilities of its neighbors, is also eager to take on the American startup. A123 has built its cathode factory in a low-tax economic export processing zone outside Shanghai, set up by the Chinese government to help foreign companies reduce production costs while creating local jobs.

This time, however, arose some problems. When A123 executives from the US return to their hotel rooms, they often find the screws on their laptops loose. An employee at A123’s office in Changzhou found an envelope in an outgoing mail basket sent to a competitor. They opened it to find the working blueprint of the cathode, along with the resume of an A123 production engineer who was fired immediately.

FUCKED

As Chinese entrepreneurs build companies that aim to make electric vehicle dreams come true, executives at A123 are riding their own wave of euphoria. The performance of the A123 engine-powered Black & Decker drill attracted other potential customers. Gillette Company wants to put the battery of the A123 in the electric razor. Mattel Inc. want them to make high end toys. But Fulop, then vice president of business development, knew that to take on the Asian battery giants, the A123 needed to turn to cars. In January 2008, he called Mujeeb Ijaz, an engineer who runs Ford’s electric vehicle factory in Dearborn, Michigan.

When Ijaz received a call from Fulop inviting him to lunch, the engineer was still reeling from the news from his superiors. A year earlier at the auto show in Washington, DC, Ford unveiled its breakthrough: the Edge, a plug-in hybrid SUV powered by hydrogen and battery power. Now, as the Big Three prepares for a recession, he is informed that Ford will cut funding for its division.

Ijaz could be reassigned to another team within Ford – after all, he’s been with the company for 15 years. But he was intrigued by Fulop’s proposal; Working on batteries was something he always seemed destined for.

Within a week of Fulop’s call, Ijaz was leading the A123’s auto business, and several members of his Ford team soon joined. The startup has a deal to build prototypes for BMW and Daimler Truck AG, and is competing with LG Chem Inc. to supply batteries for the Chevy Volt, GM’s new hybrid vehicle.

When the economy collapsed at the end of 2008, things started to “get up” with the A123. Four months after President George W. Bush agreed to give GM and Chrysler an aid package, Chrysler executives announced that they would build a line of electric vehicles using A123 batteries. By June 2009, the federal government had taken ownership of shares in GM and Chrysler, and Mr. Obama had managed to inject hundreds of billions of dollars in stimulus money into the economy.

A123 won a share: A $249 million grant from the US Department of Energy to support the construction of two manufacturing facilities in Michigan. That government backing, along with the Chrysler EV deal, helped propel the A123’s $380 million IPO in September of that year. The startup isn’t profitable, but it has promising talks with automakers in China, Europe and the US, and has enough money to invest in mass battery production. large enough to help them compete with global manufacturers.

Then in March 2012, the A123 crashed. They were contracted to build battery packs for the Fisker Karma plug-in hybrid, a $100,000 sedan created by renowned Aston Martin designer Henrik Fisker. During a test run for Consumer Reports magazine, a Fisker Karma suddenly shut down. Ijaz, then A123’s vice president of engineering, was sent to the factory to investigate. He found the cause of the short circuit. Fisker Karma’s battery management system, sensing the problem, stopped working as a safety measure.

Out of an abundance of caution and perhaps for fear of litigation, Vieau decided to disclose the matter publicly and issue a full recall and replacement of all battery packs shipped to Fisker. That will be painful, but he hopes the recall will polish the A123’s reputation as an honest supplier. But, things took a different turn, pushing the company to a cliff.

With product quality in doubt, the financial resources for other projects of A123 have been exhausted. A123 is considered a loser. Seven months after the faulty Fisker battery was discovered and a decade after its founding, A123 filed for bankruptcy.

A123 turned to Johnson Controls Inc., a Milwaukee-based auto supplier with its own battery business, to open bids for its property, but Johnson Controls and its partners were fired. Chinese auto parts giant Wanxiang bid higher. Some Republicans in Congress opposed the idea of ​​a once government-funded tech startup moving to a foreign company, but A123’s creditors at the time cared only about who. can pay the most.

In the end, nearly all of the A123’s assets, patents and technological breakthroughs were transferred to China after the sale – so did Ijaz. Wanxiang’s own battery business was launched under the A123 name, and the new A123 is shifting from a focus on pure electric and hybrid vehicles to batteries for engines that turn off when the lights are stopped to save gas. Ijaz was appointed CTO and visited Wanxiang’s headquarters in Hangzhou.

Ijaz admits, even if the US continues its journey, it will still not be enough to compete on electric vehicles. Chinese companies, which have penetrated new markets in Europe and South America, can reduce costs by achieving scale faster than anyone. Even if Ford wanted to tap a domestic supplier like One instead of a Chinese giant like CATL, it wouldn’t be realistic. The company, like most major automakers, is struggling to make electric vehicles and they have been desperately lagging behind.

Source: Bloomberg