A123’s Stock Now Under $1 0

A123 (Nasdaq: AONE) had a rocky 2011. 2012 is turning out to have its deep challenges as well.

In the face of recent genuinely positive design wins for the lithium-ion battery maker across its target markets of transportation and utility-scale storage, the firm is facing threatening self-induced as well as external issues.

On the positve side, A123 announced new automotive customers Geely, a growing Chinese automaker, and Tata Motors, India’s largest automaker. The firm is developing an engine start battery for the “micro-hybrid” market and has announced contracts with McLaren Automotive and a German OEM. A123 has also embarked on a joint manufacturing agreement with Shanghai Automotive, one of the largest automakers in China to produce A123’s prismatic cells.

Micro-hybrids are a fast growing new market. The global market for micro-hybrids could reach more than 39 million vehicles in 2017 and create a $6.9 billion market for energy storage devices, according to Lux Research. Although Lithium-ion will not be the dominant technology in that market, as per the research firm. Inclusion in Tata’s hybrid busses and commercial vehicles also represents a growing market in a high-growth region.

According to Jeff Osborne at Stifel, the Tata battery packs are in the 12-kilowatt-hour range and margins are expected to be better in the bus business than the automotive business, with volumes starting in the hundreds and potentially growing into thousands of units in late 2012 and 2013. The company also noted that over the past three months it has been awarded five contracts representing 17 megawatts of grid business.

That’s the good news.

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