Hitachi feels the heat of Competition as Supply Glut in Batteries leads to Losses

The Competition in the Battery Segment of Energy Storage keeps on increasing with entry of new players.While established players like LG Chemicals,Panasonic are increasing capacity,there has been a raft of new startups and biggies entering this segment.Toshbia,NEC,SK Energy,Sumitomo,Samsung SDI everyone wants a piece of one of the fastest growing segments of the Electric Vehicle Sector.This has already led to a  supply glut leading to a decrease in ASPs.A123 Systems has recently opening a huge factory manufacturing Lithium Cells in Michigan with the help of US government grants.With Obama aiming to capture 40% of the Global EV Market by US companies,more such factories are expected to come online resulting in a further supply demand mismatch.China also wants to create national champions in the Clean Transport Sector and has lined up huge subsidies as well.

Government Subsidized Competition could make Hitachi Battery Profits even more Distant

In such a scenario Hitachi does  not expect profits for the next 3 years.It is concentrating on higher margins segment like industrial machinery to improve margins.However increasing competition fueled by generous government subsidies and backing of huge industrial parents might make Hitachi’s profit dreams even more distant.Note Hitachi is a relatively small player with Japanese Giant Panasonic a leader in this area.The company has managed a single customer GM till date,with competition to snare more automajors extremely high. Japanese Companies are known to operate for long periods at low margins and even losses.Good for EV consumer bad for Battery Investors.

Hitachi Says Battery Division May Post Losses for Three Years – Reuters

Hitachi Ltd., Japan’s third-largest company by revenue, said its battery unit will likely post losses for at least three years after demand from carmakers fell short of the company’s expectations.

The comments underscore the challenges battery makers face as overproduction leads companies from Panasonic Corp. to Samsung SDI Co. to cut prices. Analysts at Nomura Holdings Inc. and the Institute of Information Technology Ltd. said last month price drops may accelerate this year because of a worsening glut in the industry.

Hitachi, which in March 2008 won an order to supply batteries for General Motors Co., will start shipping the devices to the automaker’s gasoline-electric hybrid models at the end of this year, Tsunoda said. Hitachi also aims to win contracts from Chinese carmakers, he said without elaborating.