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technology review July/August 2012
its Karma sedan to market in time, it cut
back orders for batteries.
But A123’s problems also reflect the
challenges facing many startups in highly
competitive energy markets. Not only is it
expensive to commercialize and manufac-
ture energy-related products—A123 has
spent well over $300 million on equip-
ment and other capital expenses over the
last three and a half years—but it is also
risky. In A123’s case, the company appeared
to scale up too quickly. As it rushed to ramp
up production for Fisker, it produced some
defective battery cells, leading to a costly
recall and replacement program.
A123 has contracts to supply batteries
for several brands of vehicles over the next
few years, including GM’s upcoming Spark.
The company says it can become profitable
eventually—if it can raise enough money
to keep going until those supply contracts
kick in over the next couple of years—and
that the contracts will allow it to achieve
the volumes necessary for exploiting econo-
mies of scale.
That path appears daunting. Andrea
James, an analyst for the investment bank
Dougherty & Company, estimates that A123
needs to sell nearly 50,000 electric-vehicle
battery packs a year—more than a tenfold
increase over last year’s sales.
She also says that the company must
make technical advances to become prof-
itable. Says Jeff Dahn, a professor of physics
and chemistry at Dalhousie University, in
Halifax, “A123 has a very impressive battery
system. It can provide very high power, and
it works really well at low temperature. But
unfortunately, it doesn’t have all the ingre-
dients that a successful lithium-ion battery
technology needs to have.” In particular,
Dahn says, A123’s battery lacks a low-cost
method of energy storage.
A123 is drumming up business in other
markets; for example, it’s selling batteries
to help stabilize the electrical grid. But it
surely will remain heavily reliant on electric
cars, whose sales overall have been disap-
pointing. To make matters worse, it’s not
clear whether A123 will hold on to EV mak-
ers as customers. Automakers need to feel
sure a company will be around for many
years to fulfill warranty obligations, and
A123’s financial troubles could scare some
of them off.
EV sales have been sluggish because the
cars cost up to twice as much as their gas-
fueled equivalents. Batteries—which sell for
over $10,000—are one of the biggest rea-
sons, even though automakers are buying
them for less than it costs to make them.
A123 talks about lowering its costs as it pro-
duces batteries in greater numbers, but this
may not do much to make electric vehicles
cheaper; it would just help A123 by finally
allowing it to make money on what it sells.
Those hoping for a revolutionary technol-
ogy that will make electric vehicles afford-
able may need to look elsewhere.
No ordinary memory card, the
TrustChip can upgrade any
phone to make super-secure
encrypted calls and data
transfers—which would usu-
ally require expensive special-
ized mobile devices. Making
encrypted connections requires
the phone on each end to have
a TrustChip installed in its mem-
ory slot. Apps can then route
calls and messages via the chip
and its 32-bit encryption pro-
cessor. The product is aimed
at organizations, like security
services and banks, that worry
mounting losses and Falling expectations
A123 has never been profitable, and its net losses have grown every year
since 2005. That’s partly because it costs more to make its batteries than
A123 can sell them for.
2005 2006 2007 2008 2009 2010 2011
2011 May 2012
Year-end prices except where noted
raz Dar, a manager at AT&T’s busi-
ness incubator in ra’anana, Israel,
talking about a prototype cloud-based
system for monitoring teen drivers.
It allows you, as a parent, to monitor kids’ driving behavior
in real time. And if your kid is sMs-ing while driving, you will
be able to log it—and even remotely disable the phone.
6/5/12 8:06 PM
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