Advanced batteries for hybrid and electric cars are starting to roll off assembly lines in the U.S., setting the stage for increased sales of energy efficient cars.

New battery plants built with the help U.S. federal stimulus funds are starting to roll their products off the assembly line, setting the stage for increased sales of hybrid and electric cars. (Charles Dharapak/Associated Press)The new battery plants were built under the Obama administration's $787-billion stimulus program and are being held up as a success story.

Battery maker A123 Systems Inc. opened the largest lithium ion automotive battery production facility in North America on Monday in Michigan. It employs about 300 people, many are formerly laid-off auto workers. The company received $249 million under the stimulus program and plans to open a second facility next year.

Automotive supplier Johnson Controls Inc. last week started shipping batteries that were made at a Holland, Mich., facility built with the help of $299 million in U.S. federal grants. The factory expects to employ 90 workers by late next year and could produce 75,000 to 150,000 batteries a year, depending on the mix of hybrid and electric vehicles it supplies.

The U.S. Energy Department estimates that the 48 advanced battery and electric drive projects announced last year under the $2.4 billion program could lead to the production of about 75,000 batteries by next year and 500,000 batteries annually by 2014. Michigan, Indiana, Ohio and South Carolina are the states with the largest share of the projects.

Some fear too many batteries, too few buyers

A Johnson Controls plug-in hybrid battery is displayed at the North American International Auto Show in Detroit. The company last week started shipping batteries made at its factory in Holland, Mich. (Kiichiro Sato/Associated Press)Despite the fanfare, the battery industry faces many hurdles. Gas-electric hybrid vehicles represent about one per cent of new vehicle sales, and many plug-in hybrids and battery electric cars are just entering the market.

Costs are high. The American government has estimated that a battery with a 160-kilometre range costs about $33,000, although stimulus money could bring that down to $10,000 by the end of 2015.

The stimulus money has raised questions about whether the projects could create more capacity to build the electric batteries than will be met with demand for the vehicles in the future.

Mary Ann Wright, a Johnson Controls vice-president, said if all of the battery companies follow through on plans to build up the industry, it could create more capacity than is needed in the short term. But she said the administration was working to address this by creating tax policies to encourage consumers to buy the vehicles and directing government fleets to adopt the technology.

'The prices of these batteries are coming down faster than we expected'—Matthew Rogers, U.S. energy department

Matthew Rogers, an Energy Department senior adviser who has overseen the battery grants, said the administration was "very confident" that the demand for the vehicles — both for typical consumers and commercial fleet customers — will keep the factories operating. "The prices of these batteries are coming down faster than we expected," he said.

The companies said the federal incentives played a major role in opening the plants in the United States. Without the money, they would have turned to Asia, where the vast majority of electronic batteries and components are now built.

"This money was instrumental in the decision to put manufacturing in North America. We think that without this, it's very unlikely that plants of this size and nature would have been happening in the U.S.," said David Vieau, A123 Systems's chief executive.