Magna Int. MG.A-T is marshalling its forces for the battle of the batteries.
The auto parts giant is searching for sites in North America and Europe to build two plants to manufacture the batteries, joining global auto makers in making an expensive wager that electric vehicles will take off later this decade.
The potential investment is between $400-million (U.S.) and $600-million and production of batteries could begin in 2013, Siegfried Wolf, Magna’s co-chief executive officer, said Tuesday.
The move into battery making positions Magna to take advantage of the boom in hybrid and electric vehicle development that is already under way as auto makers strive to meet aggressive new worldwide regulations for fuel economy and tailpipe emissions that come into force by 2016.
It also puts the Canadian auto parts giant in the thick of a battle between deep-pocketed battery makers that are working to bring down the costs of their products while increasing their range, one of the key issues that will determine the success of electric vehicles.
Magna has “absolutely” won enough business that the construction of two battery plants is necessary, Mr. Wolf said.
His comments come at a defining moment for Magna as it seeks shareholder approval for a deal that includes the shift of much of its electric vehicle business into a joint venture between the company and Frank Stronach, part of a larger proposal that includes the company founder trading his class-B multiple voting shares for $300-million in cash and nine million single-vote shares.
That joint venture will include agreements between Magna and South Korean battery maker Kokam Co. that Mr. Stronach described as giving Magna access to Kokam’s battery technology.
The partnership will assume responsibility for applications for loans and grants provided by Canadian, Ontario and U.S. governments for hybrid or electric vehicle initiatives, said a Magna filing with securities regulators.
Magna’s contract with Ford Motor Co. to produce the electric-powered Focus compact that appeared nightly on the short-lived Jay Leno prime-time television show has generated most of the publicity about the parts company’s electric vehicle business.
But Magna has also won contracts with German auto maker Daimler AG and Volvo Powertrain, the division of AB Volvo that develops engines and transmissions for the company’s heavy truck and bus businesses, according to regulatory filings.
Development of new vehicles such as plug-in hybrids that use mainly electricity, as well as pure electric vehicles, represent one of the few growth areas for parts suppliers, said Brett Smith, director of the automotive analysis group of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.
“If you’re a supplier, you look at it and say: ‘You know, some of my technologies are highly competitive, almost commodity markets now. The way to grow and differentiate is to become an electric vehicle technology provider and oh, by the way, the government is going to give me money to do it.’ ”
Magna and Mr. Stronach are betting that electric power will be the vehicle propulsion system of the future and that lithium ion batteries will be the source of the electric power.
The auto parts maker has purchased a 13-per-cent stake in Lithium Americas Corp., a deal that gives Magna the right to acquire 25 per cent of the lithium produced by the Toronto-based mining company at a 5-per-cent discount from the market price.
Lithium Americas expects to be producing lithium by 2014.
