Advanced Electric Car Battery Makers Struggle, But...
Tough Times for Battery MakersFrom a financial point of view, times are tough for advanced battery technology startups. Yesterday, sky was the limit. But projections for sales proved optimistic, the number of jobs created is lower than expected, and the money reserves, a lot of it from government grants, are depleting fast. The Wall Street Journal writes:
"Since 2009, the Obama administration has awarded more than $1 billion to American companies to make advanced batteries for electric vehicles. [...] The money funded nine battery plants—scattered across the U.S. from Michigan to Pennsylvania and Florida—that have few customers, operate well below capacity and, so far, have created less than a third of the jobs promised by 2015."
Gloom & doom, right?
Keeping Things in PerspectiveThe first thing to remember is that the financial health of an industry is different from the health of the technology itself. In the recent past, times were very tough for producers of solar panels, but the buyers saw rapid price declines and as fast as ever performance improvements. While the industry was struggling, it was the best time ever to buy solar panels. Similarly, right now the cost of advanced batteries is falling.
So there's a big difference between how an industry can change the world and how much money it'll make. Warren Buffett likes to give the example of airlines, saying that since the Wright brothers, airlines haven't made any money in aggregate, in fact they're probably pretty far in negative territory. But that doesn't mean that air travel hasn't changed the world and become a lot better and more affordable over the past century. A similar thing happened with the internet bubble; few companies made money, and they almost all went belly up after a few years, yet it didn't stop the internet from progressing rapidly.
So I think the same will happen with battery technology. Many companies will have a tough time, many will fail, but overall, the technology will keep progressing until at some point it is cheap and good enough to It's going to be a non-linear process, which means that for a while it might not look like much progress is being done, but past a certain threshold, the floodgates should open (like how after cellphones became cheap and good enough for most people, we went from almost nobody having cellphones to almost everybody having one in a few years -- it'll take longer for electric cars, but the same kind of tipping point could take place).
In short: It's not because battery makers aren't a good investments that the technology itself won't keep moving forward rapidly.