Honda Boosts Hybrid Bet With Lithium Battery Venture

By Alan Ohnsman
Dec. 17 (Bloomberg) -- Honda Motor Co., a holdout as other large carmakers unveiled plans for plug-in, battery-powered models, increased its commitment to hybrid vehicles by announcing a joint venture to supply lithium-ion batteries.

The agreement with battery supplier GS Yuasa Corp. calls for making high-powered lithium packs for new gasoline-electric models, Honda said today in Tokyo. The business, with 15 billion yen ($171 million) of capital, will be 49 percent owned by Honda and 51 percent by its partner.

“In the short term, we believe one of the easiest ways to reduce CO2 is to expand hybrid technology to midsize and larger cars,” David Iida, a Honda spokesman, said in an interview from the company’s U.S. headquarters in Torrance, California. “These will be batteries that produce the high power needed for hybrids,” not energy density needed for plug-in vehicles.

Honda, first to sell hybrids in the U.S. and lease hydrogen fuel-cell cars to drivers, hasn’t yet offered lithium-ion packs in its hybrid models, citing cost and durability problems.

Toyota Motor Corp. plans to test lithium-ion plug-in Priuses in the U.S. next year and General Motors Corp. aims to sell rechargeable Volt sedans by 2010, when Nissan Motor Co. expects to introduce electric cars that can travel 100 miles (160 kilometers) per charge.

Setting up the battery venture is tied to Honda’s decision to delay its so-called clean diesel autos, said Paul Lacy, an analyst at IHS Global Insight in Troy, Michigan. Honda indefinitely suspended plans to sell fuel-efficient, low-emission diesel cars, originally planned for 2009.

Diesel-Gasoline Gap

“These things are not unrelated,” Lacy said. “The gap between diesel prices and regular gasoline has grown, and from a unit price standpoint, the cost of equipment needed to clean up diesel exhaust isn’t cheap.”

By comparison, offering more hybrid models, as Tokyo-based Honda said it will do, and boosting production of batteries may bring the cost of hybrid parts down faster than can occur with diesel systems, Lacy said.

“As you grow in volume with hybrids, you get economies of scale that reduce prices,” he said. “With diesel it’s not that simple.”

Lithium-ion batteries are lighter and hold as much as twice the energy compared with nickel-metal-hydride models now used in Honda and Toyota hybrids. Producing large lithium-ion cells for autos is also more difficult and costly, and such batteries have been less durable in tests, automakers and analysts have said.

Honda announced the battery project after President Takeo Fukui earlier cut the company’s full-year profit forecast by 62 percent, citing a surging yen and falling sales in North America and Europe.

Honda, Mitsubishi Supplier

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