Hybrid Battery Shortage Explained: Poor Planning

With gasoline topping $4 a gallon, hybrids are so hot that the auto industry can’t produce enough to satisfy demand. Carmakers point to a shortage of battery packs, but the real story has little to do with a shortage of materials. Car companies—including Toyota, which owns about 80 percent of the hybrid market—did not create contingency plans for the possibility that gas prices and hybrid demand would dramatically rise.

Auto battery expert Menahem Anderman, founder of Advanced Automotive Batteries, told HybridCars.com that the real shortage is a “shortage of planning.”

Anderman explained that batteries are produced under contract with the automakers at specified quantities and prices. Changes in battery orders have a major effect on pricing, so carmakers and battery suppliers carefully consider the production quantities when entering into a contract. Because batteries are the most expensive component of the hybrid system, carmakers keep their financial commitments to battery suppliers at low levels to save money on each unit.

"A year ago, our [vehicle] supplies were at record level in Prius," Bob Carter, head of Toyota’s U.S operations told the trade journal Automotive News. "Now we're in catch-up mode." Toyota can’t ramp up battery production fast enough to build enough Priuses to meet demand, Carter said. Waiting lists for Prius are growing to six months and longer. "We're pushing for every bit of production we can get," Carter said. "We're working very closely with our suppliers to increase that capacity."

Auto industry analysts reported that Toyota is preparing production for the 2009 model year of the Prius, which also adversely affects Prius production quantities this year. Toyota also indicated that the battery in the next generation Prius will be different than the current version, yet another reason the company is cautious not to overproduce the current model.

For the Escape and Mariner hybrids, Ford Motor Co. has limited access to hybrid batteries—about 25,000 packs a year—from Sanyo Electric Co., its Japanese supplier.

General Motors is also unable to take advantage of the hot hybrid market. GM recently said that its domestic supplier, Michigan-based Cobasys, shipped as many as 9,000 hybrid battery packs that leaked and had to be replaced. Anderman said that the Cobasys problem “did not surprise him." In an interview with HybridCars.com, a Cobasys executive claimed that media reports about its battery problems were "not entirely true."

Producing nickel-metal hydrid batteries to last the lifetime of the vehicle—as much as 150,000 miles—is “not a trivial task,” said Anderman. The next generation of hybrid batteries, using lithium ion, are expected to be even more challenging from a technical and planning perspective.

Little short-term relief in hybrid inventory is in sight, particularly for a vehicle like the Prius that has to be shipped across the Pacific Ocean to reach the market. It could take several months to increase battery production, install the batteries, and then deliver the extra vehicles to customers.