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Science/Tech See other Science/Tech Articles Title: Analysis: BASF to take on Asia's battery chemicals makers FRANKFURT, July 16, 2012 (Reuters) — BASF need not be worried by dominant Asian players' expertise in batteries as the world's largest chemicals maker looks to become a leading provider of materials at the heart of next-generation electric cars. The German group will invest roughly 500 million euros ($609 million) by 2016 trying to become a major force in a market that could be worth tens of billions of dollars in less than a decade. Analysts say it is a gamble worth taking as the car industry looks to develop electric vehicles (EVs) with a range up to 250 km from about 2017. The playing field is essentially level because all players, such as Japanese groups Hitachi Chemical <4217.T> and Mitsubishi Chemical <4188.T>, will enter new territory - the battery industry's move from powering mobiles to making the driving force for cars will lift everyone out of their comfort zone. "Japanese and Korean companies in the lead in the computer battery market won't necessarily have a head start when it comes to automotive batteries," said Andreas Gocke, a managing director at The Boston Consulting Group, which advises car and chemicals companies. Batteries for cameras and smartphone need more than just rescaling to power cars - apart from packing a much bigger punch, the batteries need to resist shocks and crashes, work reliably in extremes of cold and heat, and last for years. BASF itself says knowledge acquired over the years by Asian companies making batteries for electronic devices will be of little help when it comes to the high-performance energy storage the car industry needs. "The race is open. The technologies are still malleable," a spokesman said. Today's market for battery chemicals is highly fragmented. Japanese players such as Ube Industries <4205.T> prevail with a combined market share of 60-90 percent, depending on the segment, with Chinese and Korean players catching up. Belgian group Umicore , as one of the top providers of cathode materials, is a lone European contender. To catch up, BASF has spent about half the budget earmarked for developing its battery materials business through 2016 as it aims to become a market leader in the long term. BASF's acquisitions this year include Novolyte Technologies, a U.S. maker of electrolytes, and German group Merck KGaA's electrolytes business. It also bought Ovonic Battery Co, which invented and owns the rights to nickel-metalhydride battery technology, the type used in Japanese carmaker Toyota's <7203.T> Prius. Global initiatives to tackle greenhouse gas emissions are helping boost the use of EVs. On Wednesday, the European Union said it wanted carmakers in the region to cut average new-car fleet carbon dioxide emissions about a third to 95g per kilometer by 2020. The potential gains for BASF are sizeable. Deutsche Bank analysts in Tokyo said in a report last year the market for lithium-ion car batteries market would reach $57.5 billion by 2020. Consultancy BCG estimated the market for EV batteries by 2020 to be only $25 billion, roughly in line with BASF projections and about three times the size of today's lithium-ion battery market for portable electronic devices. BCG said that, for now, niche uses will drive growth. EVs must be in heavy use to make the most of the favorable fuel economy and to justify the hefty price tag, currently twice that of a conventional car of the same size. That is why EVs will, over the next 10 years, mainly appeal to some commuters and to the likes of taxi or postal services companies and field-service fleet operators, BCG said. BASF aims to generate 500 million euros in sales by 2020 and be among the top three battery chemicals suppliers by then. While small compared with BASF's 73.5 billion euros annual sales, the new business would serve its drive into high-margin specialty chemicals that lead to high customer loyalty. The group's sheer size will help. "The research budget you will need to bring third-generation batteries to market ... are so high that medium-sized companies will not make it," said Ralf Meixner, who oversees BASF's battery chemicals ventures. The road for Meixner's team is long, as his personal choices show - he drives a diesel. ($1 = 0.8208 euro) (Editing by Dan Lal Post Comment Private Reply Ignore Thread
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