We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Sustainable Energy

A123 Predicts a Good Year, Providing Electric Cars Sell

Despite losing over $250 million last year, the company remains optimistic.

A123 Systems—the battery maker that’s central to the Obama administration’s efforts to establish an advanced battery industry in the United States and to greatly increase the number of battery-powered vehicles on the road—announced today that it lost $258 million in 2011, compared to $152 million in 2010. In spite of the loss, the company remains optimistic, predicting lower operating and capital costs and a 45 percent to 89 percent increase in revenue in 2012. But hitting those targets will depend on more consumers buying electric vehicles, and so far, demand has been lower than A123 expected.

Things initially looked good for A123 in 2011. Revenues increased from $18 million in the first quarter to $64 million in the third quarter, as the company sold batteries to Fisker Automotive for the Karma extended-range electric sedan. But later in the year, the Karma was delayed, and Fisker stopped ordering batteries from A123, with the intention of using up the batteries it had already ordered. That left much of A123’s factory idle.

On top of that, A123 ran into production problems that decreased yields in the fourth quarter of 2011, and it had to deal with costs for repairing battery systems for the Karma and another heavy-duty battery pack made for BAE Systems.

A123’s revenues dropped to $40 million in the fourth quarter last year, and the company expects revenues to fall still lower this quarter, returning to the level from the first quarter of last year, erasing the temporary gain it had from the Fisker deal and other contracts.

A123 did, however, point to some good news on its earnings call today. It said that because of several new production contracts, it won’t rely on any one company for more than 15 percent of its revenue. By one analysis, Fisker accounted for 30 percent of the company’s revenues last year, before it stopped buying batteries. A123 also expects to sell more batteries for use on the electrical grid than it planned, which partially offsets disappointing electric-vehicle sales.

A123 expects revenues to be low until the fall of this year, when, it says, production will ramp up for cars from several automakers, including Fisker, the Chinese automaker SAIC, BMW, and the truck and bus manufacturers Via, Smith, and BAE Systems. A123 also expects to sell batteries for the GM Spark, a new electric vehicle. It has signed contracts to produce batteries for several more vehicles in 2013; and it will install several battery systems for the grid this year.

Although grid sales are increasing, A123’s success will still depend largely on whether the new electric cars sell. So far, the signs don’t look good. Sales of the electric vehicles have been slower than automakers predicted, and GM recently announced it was temporarily halting production of the GM Volt due to lack of demand. 

A123 will also face competition from other battery makers who will continue to improve their technology. But it says it will announce new technology this year that will help it compete.

One new market for A123 may prove a boost, however. A123 may benefit from selling more batteries for micro-hybrids, which use small batteries to assist a gasoline engine. Such cars are far less costly than electric vehicles and are therefore likely to sell in higher volumes. 

Become an MIT Technology Review Insider for in-depth analysis and unparalleled perspective.

Subscribe today
More from Sustainable Energy

Can we sustainably provide food, water, and energy to a growing population during a climate crisis?

Want more award-winning journalism? Subscribe to Insider Plus.
  • Insider Plus {! insider.prices.plus !}*

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.

    See details+

    Print + Digital Magazine (6 bi-monthly issues)

    Unlimited online access including all articles, multimedia, and more

    The Download newsletter with top tech stories delivered daily to your inbox

    Technology Review PDF magazine archive, including articles, images, and covers dating back to 1899

    10% Discount to MIT Technology Review events and MIT Press

    Ad-free website experience

You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.