Yesterday, A123 Systems (Nasdaq: AONE) announced a new battery technology that could help give the electric and hybrid vehicle markets a huge boost…
In short, A123 manufactures high-power lithium-ion batteries for consumer and commercial vehicle markets. It currently supplies batteries to companies like BAE Systems (LON: BA), Daimler (ETR: DAI), BMW (ETR: BMW), Fisker and General Motors (NYSE: GM). And the company’s new battery technology, Nanophosphate EXT, should keep these vehicle makers happy for a long time to come.
That’s because the new battery is able to function more efficiently under extreme temperature conditions. Meaning that it can maintain its charging capacity at higher temperatures, and generate more power when it’s cold.
For instance, during a test at Ohio State University’s Center for Automotive Research (CAR), researchers found that even after 2,000 charge cycles at a temperature of 113 degrees, the battery retained over 90% of its original capacity. And during the University’s current cold temperature performance study, the company believes that the battery can boost power by 20%, even at 22 degrees below zero.
According to Dr. Yann Guezennec, senior fellow at CAR, Nanophosphate EXT is “unlike anything we’ve ever seen from lead acid, lithium ion, or any other battery technology.”
Here’s why the technology could jumpstart the electric vehicle market…
Cheaper EVs on the Way?
Essentially, being able to maintain battery capacity at high temperatures means that carmakers could soon ditch cooling systems in eco-friendly cars. Like the company’s CEO, David Vieau, says…
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“Nanophosphate EXT is a game-changing breakthrough that overcomes one of the key limitations of lead acid, standard lithium ion and other advanced batteries. By delivering high power, energy and cycle life capabilities over a wider temperature range, we believe Nanophosphate EXT can reduce or even eliminate the need for costly thermal management systems.”
Guezennec backs up the CEO’s statement, too: “We believe Nanophosphate EXT could be a game-changing battery breakthrough for the electrification of transportation, including the emerging micro hybrid vehicle segment.”
You see, a major reason the EV market hasn’t picked up steam is because they’re just too expensive. But getting rid of the need for a cooling system could reduce costs considerably. Not to mention that less cooling equipment means lighter cars, which leads to even better battery efficiency.
Like John Voelcker, an analyst with Green Car Reports, says, “Pumping coolant through this system eats up energy and reduces on-road range… [This new battery] would reduce the weight, complexity, and cost of future plug-in vehicles, bringing down their cost and moving them closer to mass-market competitiveness.”
Investors obviously see the potential, as well. The news sent shares skyrocketing over 50% yesterday. And since shares have dropped 17% as I write, some investors would see this as a perfect buying opportunity. Especially considering that with insider ownership around 30%, company executives are certainly not running for the hills.
However, I’d practice some caution before going all in.
Louis Basenese informed Wall Street Daily readers, back in January, that the company was struggling to make a profit, even with a hefty government subsidy: “Even though [A123] received at least $249 million in government funding, to date, it remains unprofitable. What’s more, since its IPO in 2009, the stock’s collapsed 90%.”
Making matters worse, in March, Fisker announced a recall for its Karma sedan’s battery pack made by A123. That mistake cost the company around $55 million and sent shares plummeting another 50%.
Bottom line: While the advanced technology certainly makes A123 worthy of your attention at this time, the stock’s bound to experience some wild swings in the short term.