A123 Stocks Soars, But Will Its New Deal Deliver?
A123 Systems’ announcement that it is forming a joint venture with China’s SAIC Motor Form to get into the Chinese pure electric market has sent its flagging stock soaring. The company’s stock was approaching $20 at 1 p.m. today, up 2.8 percent on the day.
The Watertown, Mass. battery maker reported yesterday that they would develop, manufacture and sell battery traction systems for hybrid and pure electric passenger vehicles and heavy duty trucks in China.
The new venture with SAIC, China’s largest vehicle manufacturer, will be called Shanghai Advanced Traction Battery Systems.
A123 was also awarded a contract to supply battery systems for SAIC’s plug-in vehicle program.
This is certainly a win for A123, which has gone from being a cleantech darling after its successful September IPO, to just another middling company. The company lost a prestigious contract when Chrysler announced that it would discontinue its electric vehicle project and join in the design of its parent Fiat’s SpA.
Environmental Capital isn’t that optimistic that this deal will be the silver bullet the company needs. Gas isn’t expensive enough, governments aren’t committed enough to providing subsidies and incentives and electric cars are just too expensive for this venture to pay off anytime soon.
China is making a big push for electric cars to go mass market in the next few years. And, it goes without saying, it’s a pretty big market.
Still, as we’ve written before, A123 reminds us of the heady days of the internet startups. Hoping that the market will open up for you, simply isn’t a winning business plan.
