A123 Systems, SAIC to set up China car battery JV

Lithium-ion battery maker A123 Systems Inc said on Thursday it is forming a joint venture with China's top carmaker SAIC Motor Corp to sell battery systems for electric vehicles in the world's largest automotive market.

A123's joint venture with SAIC would build complete vehicle traction battery systems for hybrid electric, pure electric passenger vehicles, and heavy-duty truck and buses in China.

"This is a major commitment to the Chinese market," said Jason Forcier, who leads A123's automotive division, in an interview. "We are looking to be basically the market leader in China, both in the truck and passenger car market."

Following the news of the announcement, shares of the Watertown, Massachusetts-based company, which debuted on the Nasdaq stock exchange in September, closed up 6 percent at $19.40.

The venture, called Shanghai Advanced Traction Battery Systems Co, would be owned 51 percent by SAIC and 49 percent by A123 Systems, according to the companies.

Forcier said the Chinese bus market was an attractive segment for the company in the short term, given the government support for electricity-powered buses.

The passenger car market was much more lucrative in the long term, he added.

Forcier said A123 Systems is expanding its presence in Europe and in discussions with companies in India.

A123, which won a $249.1 million grant in August from the U.S. Department of Energy, will start production at its first U.S. battery plant in mid-2010.

The automotive market for lithium-ion batteries, mostly found in mobile phones and computer laptops, is projected to be $32 million in 2009 but is expected to skyrocket to $22 billion in 2015, according to A123's prospectus.