Potential Battery Woes Reportedly Cause Toyota to Delay Hybrids

From Staff Reports

Toyota Motor Corp. (NYSE: TM) has delayed the product launch dates of some proposed new high-mileage hybrid cars that will use lithium-ion battery technology. The Wall Street Journal said that major safety concerns relating to the new type of batteries was behind the decision. The decision is a blow to Toyota, whose gas-electric hybrid car, the Prius, fueled a major sales surge in the U.S. market. The delay could give U.S. carmakers General Motors Corp. (NYSE: GM) and Ford Motor Co. (NYSE: F) a window of opportunity to gain market share and close the gap on Toyota. Both U.S. firms are developing alternative-fuel vehicles of their own.

Indeed, Toyota lost its position as the world's No. 1 auto seller to GM on a quarterly basis in the second three months of this year, although it outsold GM in the first half of the year for the first time ever. During the first half of the year, Toyota sold 4.72 million cars to GM's 4.67 million. GM sold 2.41 million vehicles globally in the recent quarter, a year-over-year gain of 0.4%, while Toyota sold 2.37 million vehicles in the June-ended period, for 7% growth. Analysts have said Toyota will likely outsell GM for the full year.

The new line of hybrid automobiles was due out between next year and 2010. Their predecessors now on the market currently use nickel-metal-hydride batteries, the rechargeable-cell technology with the appearance of conventional batteries that consumers currently use for video games, digital cameras, portable radios and flashlights, and other consumer products.

This new-model rollout was a central piece of Toyota’s strategic goal of selling 600,000 hybrid-powered cars in the United States market within five years, compared with an estimated 200,000 last year, the Journal reported. But that plan is on hold, too, now, due to the battery problem.

Lithium-based cells represented an industry paradigm shift, allowing battery manufacturers to construct battery cells that drop drastically in size and weight, even as they pack more of an electrical punch. And that Moore’s Law-like relationship has enabled the manufacturers of such consumer products as cell phones or notebook computers – both of which have already largely migrated to lithium-ion battery technology – to engineer dramatic reductions in the size and weight of the products, even as processing power and feature utility soars.

But from the time lithium-based batteries were introduced, some of the cells using cutting-edge chemistries were prone to overheating and even fire – problems that scorched the notebook businesses of both Sony Corp. (NYSE: SNE) and Dell Inc. (Nasdaq: DELL). And since the batteries used in automotive vehicles are naturally much larger in mass and in power, the risk may be inherently larger if the problem isn’t addressed.