Foreign car makers in China, including General Motors Co (GM) and Toyota Motor Corp, last year thought they had scored a victory over Beijing’s efforts to strong-arm them into sharing cutting-edge electric car technology.
However, that could prove compromised as leading Chinese auto parts firm Wanxiang Group’s (萬向集團) US$465 million investment in A123 Systems Inc, a struggling US maker of lithium-ion batteries, may help China unlock the secrets to critical and advanced green-car technologies.
The investment has ruffled feathers in the run-up to the presidential election in the US, as A123 receives government grants tied to it keeping production and jobs in the US during an economic downturn that has seen unemployment levels remain stubbornly above 8 percent.
Some industry executives, including engineering chiefs from two global automakers who did not want to be named because of the sensitivity of the matter, expressed concern at the prospect that A123 could lose control of its fiercely guarded battery design and manufacturing know-how. They are particularly worried that Wanxiang might shift part of A123’s research and development activities to China — if the deal wins US and Chinese government approval.
“I don’t care if A123 manufactures more battery cells and packs in China. That wouldn’t jeopardize its technological advantage,” a chief engineer at one global automaker said. “But showing what’s inside their black box ... the technology that makes those battery cells packed with energy, to its Chinese investor, which has its own battery business, is completely another matter.”
There are several types of lithium-ion battery — an advanced energy-storage device that has made the electric car a possible alternative to gasoline-fueled vehicles. A123’s technology, which uses iron-phosphate, is seen in the industry as having better chemical stability, making it safer for electric cars.
The enabling technology was in part developed by a Massachusetts Institute of Technology professor who is one of A123’s founders, and is patented. The “nano technology” involved, for instance, shrinks lithium particles to nano dimensions, helping boost a battery cell’s energy density and putting more power into a smaller box.
Wanxiang’s lifeline to loss-making A123 could see it end up with around an 80 percent stake in the Massachusetts-based battery maker, and four of the nine board seats.
Pin Ni (倪頻), a son-in-law of Wanxiang’s founder and head of the group’s US operations, said his company would not do anything to harm A123, which listed on the NASDAQ stock exchange in 2009.
“Obviously we’re going to try to grow the company; we’re going to do what’s best for the company,” Ni said by telephone, declining to elaborate.
People close to Wanxiang and familiar with its A123 investment, said the company would behave responsibly with A123’s intellectual property, adding that the US firm already produces advanced batteries in China.
Fears of A123 losing control of its intellectual property are overblown, they said.
Wanxiang is a major auto parts supplier and has a relatively large presence in the US, having bought up distressed parts makers over the past decade. It formed a joint venture which bought and turned around Driveline Systems, an axle maker in Illinois, and has taken over parts operations from Ford Motor Co, among others in the US Midwest.