Ener1 loses out in run-off for Fisker battery supply deal

It was a week of contrasting fortunes for two of the world's leading developers of electric car batteries, after hybrid plug-in car manufacturer Fisker Automotive ended negotiations with lithium ion battery specialist Ener1 and immediately announced a multi-year battery supply deal with A123 Systems.

California-based Fisker, which is developing a plug-in hybrid sports car known as the Karma, which is expected to travel up to 50 miles on its battery before switching to a conventional engine, announced on Thursday that it had selected A123 Systems to provide the batteries for its flagship vehicle ahead of its launch later this year.

The companies said that they had also agreed to work together on Fisker's next model, code-named Project Nina and slated for launch in 2012.

"Fisker Automotive selected A123 because of the company's ability to meet our performance needs and rapidly scale to our production volume," said Henrik Fisker, chief executive of Fisker Automotive.

The announcement is a blow for Ener1, which had previously supplied prototype batteries for the Karma, but confirmed in a Securities and Exchange Commission that negotiations for a wider supply deal had fallen through.

The supplier's share price fell by around 16 per cent last week to $5.18 (£3.16) as investors digested the fact the company had missed out on a deal estimated to be worth between $150m and $200m.

The company, which still boasts auto giant Volvo and Norway-based electric car firm Think among its customers, reportedly lost the deal over questions about its ability to ramp up production quickly enough to meet Fisker's requirements.

Dilip Warner, an analyst for investment services firm Thomas Weisel Partners, said in a statement that he was looking for further volume contract wins and evidence of being able to ramp up production quickly "before we warm up to the Ener1 story". But he added that, while last week's news heightened "the near-term risks to the story, we continue to see Ener1 as well positioned longer-term among the battery start-ups, with its vertically integrated business model".

In related news, high-profile Chinese electric car firm BYD announced last week that it intends to sell its e6 electric cars, which it claims have double the battery life of rivals such as Toyota and Nissan, into the US market by the third quarter of this year.

The e6 is a five-passenger plug-in hybrid, which can travel 62 miles on a single charge and costs $22,000 in its domestic market.

The firm, which counts US billionaire financier Warren Buffett among its backers, is already the world's largest mobile phone battery supplier, and has vowed to become one of the world's largest car companies over the next decade.