Ener1 and Volvo team up, leaving Think behind?

Gothenburg, Sweden’s Volvo picked New York-based Ener1’s (Nasdaq:HEV) lithium-ion battery packs today to power its two, diesel hybrid V70 demonstration cars.

But it’s still too early to tell how the partnership could pan out, Thomas Weisel Partners Research Analyst Dilip Warrier told the Cleantech Group. Warrier also said the news could indicate Ener1 is moving away from its partnership with Oslo, Norway’s Think Global.

Ener1 develops and manufactures lithium-ion batteries intended to power next-generation hybrid and electric vehicles. Major shareholders of Ener1 include Ener1 Group, a private, global investment and advisory firm, and Itochu, a Japanese trading company and distributor of manufacturing equipment used for lithium-ion battery production.

Today’s announcement sent Ener1’s stock up 4.47 percent, closing at $5.38. 

The development program is expected to produce a commercial plug-in hybrid model by 2012. The project is a joint venture between Volvo and Sweden’s Vattenfall, one of Europe’s largest electric utilities, which began in January 2007. Vattenfall is Europe’s fifth largest generator of electricity, with operations in Denmark, Finland, Germany, the United Kingdom, Poland and Sweden.

Volvo is the car developer, while Vattenfall is responsible for testing high-speed, at-home and public electric charging stations for the batteries. The batteries are expected to offer a 31-mile, all-electric driving range, prior to the diesel engine being needed.  According to Volvo, the battery packs being testing have a capability of 11.3 kilowatt hours.

The batteries for Volvo are made by Ener1's manufacturing subsidiary, EnerDel (see Ener1 buys full ownership of EnerDel). In June, Indianapolis-based EnerDel secured up to $3.3 million in funding for a cost-share research project under the U.S. Department of Energy. The project aims to further develop technologies to eliminate overcharging in lithium-ion batteries (see Pound-for-pound, cleantech deals have a British twist).

According to a news release, a standard production car was chosen as the demonstration platform to prove broad applicability of the technology in otherwise conventional automobiles. The diesel engine is expected to eventually run on renewable biodiesel as well as standard blends.

The two demonstration cars are planned to be used to garner information and experience about the driving habits, charging needs, and performance expectations of motorists using the new technology.

Warrier said he thinks Volvo picked Ener1 over other competitors in the space because of its vertically integrated capabilities. The company doesn’t just make the cells. It also makes the battery packs and can customize them in record time.

Warrier said Ener1 has previously alluded in calls with analysts that it was selected to supply to a major OEM, but just had not announced which one.

Until now, he said Ener1’s focus has been on the fortunes of Think Global, which is working to accelerate highway readiness of its electric vehicle, the Th!nk City (see Ener1, Think demonstrate operational battery pack). In May, Think received a certification for its vehicle to be sold in all European countries (see Think gets EU-wide approval for EV sales).

He said Ener1 has also indicated potentially supplying its batteries to Fisker Automotive, which signed a $10.2 million contract last week with Quantum Fuel Systems Technologies Worldwide. The recent deal is to complete development of its plug-in hybrid powertrain,, which would be launched in Fisker's luxury cars (see Quantum lines up $10.2M contract with Fisker). The first Fisker vehicles are expected to be delivered in Europe in 2010 (see Fisker closes $85M financing in run-up to production).

“The focus is moving away from Think,” Warrier said. “With Volvo, it’s a nice name to have. It’s a very long-term opportunity here.”

Warrier cautioned that plenty can change between now and Volvo’s target of 2012 for a commercial model. He indicated Volvo is most likely testing a variety of batteries in addition to those of Ener1.

“The long-term costs of lithium-ion batteries remain a concern. It’s still early days to get too excited about Volvo,” he said. “Volvo still needs to determine what its production volumes are going to be.”

Thomas Weisel Partners sees Ener1 as a future potential winner among lithium-ion battery producers, with a 12 to 24 month lead time over its competitors in terms of technology and manufacturing readiness.

But Warrier is looking for further volume contract wins and evidence of its ability to quickly ramp up production before recommending the company’s shares. The firm is holding a market-weight rating, with a price target of $6.

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