A123 lands fresh battery funding, eyes expansion

US-based A123 Systems has landed a further $169m (£113m) in funding to help bolster its nanotechnology based battery manufacturing capacity in the wake of recent supply deals with a number of high-profile electric car firms.

The firm secured a $69m investment from General Electric (GE), and also announced $100m in tax credits from the Michigan Economic Development Corporation.

This is the seventh time that GE has invested in A123, and the former now owns a 10 per cent stake in the battery developer. A123 said it will use the latest round of GE funding to expand existing manufacturing capacity, while also building a new facility in Michigan.

The company, which has established itself as a pioneer in the field lithium-ion battery technologies and is a major supplier to a number of emerging players in the electric vehicle market, uses nanotechnology developed at MIT to create batteries that offer better performance than traditional lithium-ion cells.

The company hopes to produce batteries for five million hybrid vehicles or 500,000 electric vehicles a year by 2013. The latest investment will be used to fund the creation of batteries for a variety of deals that A123 has signed with auto manufacturers. For example, it has been signed to produce lithium-ion batteries for Chrysler's first-generation electric vehicle, along with hybrid models from Chinese vendor SAIC Motor Corp.

In addition, the company said the funding would also enable it to begin building utility scale energy storage that could be used in renewable energy projects.

The Michigan Economic Development Corporation tax refund deal will see the company establish a mass production facility for lithium-ion cells in Livonia, Michigan. The tax breaks follow the award of a $10m grant from the company to A123 in November last year to help it create a research and development facility at the same site.

A123, which filed the registration statement for its Initial Public Offering last August, has also applied for $1.84bn in direct loans to build a plant in south east Michigan as it seeks to ramp up production capacity ahead of an expected boom in demand for energy storage technologies from the auto, construction and renewable energy industries.