Boston-Power Move To China No Surprise To Analysts
When Boston-Power founder and worldwide chairman Christine Lampe-Onnerud made the announcement this week that the company would move 30 jobs out of MetroWest and open a new facility that will create hundreds of new jobs in China, she admitted that it was not an announcement she wanted to be making.
"It's some pretty nice growth for the company, but of course it comes with some sadness," she said the day the company made the announcement.
Lampe-Onnerud wanted to grow the company in the United States, in Massachusetts and in MetroWest.
But, market drivers brought the company to China.
"We have to recognize an emerging market when we see it," she said.
Boston-Power is not alone in making the trek to the Asian powerhouse. Analysts that track the battery industry and electric vehicle market say that Chinese officials have aggressive plans to attract international businesses to the country and are using significant incentives to lure the businesses into the country.
Not Alone
Michael Lew, an analyst with Needham & Co. in New York, who tracks the battery industry, is not surprised at all by Boston-Power's move.
"China has a big problem with pollution, so there is a big push for electric vehicles (EVs) in the nation," he said. "The country wants to become a market leader in EVs, so they've devoted significant resources to attracting businesses."
Tax incentives, grants and partnerships with other companies are all being used by the Asian powerhouse to attract a variety of businesses to China.
Plus, for Boston-Power, the move makes sense. The company, Lew said, has a viable technology. Its lithium ion fuel cell technology has already been adopted by NASA and Saab. But one of the biggest problems for the company has been the cost of its products. By going to China, the company will likely have significantly cheaper labor and production costs, allowing the company to sell the batteries at a lower cost.
The move could eventually be a strategy to build up sales in U.S. and European markets, Lew noted. If the company is able to produce lower-cost batteries, there could be a market for those domestically.
But for now, China is the growth sector for EVs, notes John Gartner, an analyst with Pike Research in Boulder, Co.
"China is starting off as a fairly small market, but it will grow quickly," he said. "The Chinese basically want to leapfrog global competitions and jump ahead of them rather than compete with them."
So, the Chinese government has set up lucrative financing and incentive packages to draw international businesses to the country.
General Motors announced a partnership with a Chinese company this week to develop a new EV infrastructure that can be replicated around the country.
Ener1, an Indianapolis-based battery company recently signed an agreement with a Chinese firm, as did Altair Nanotechnologies, Lew said.
And now, it will be Boston-Power.
The company announced this week $125 million in new financing from GSR Ventures, an equity firm that supports businesses that invest in China and the U.S. With the new funding, the company expects to open a research and development center in Beijing, as well as a manufacturing plant. It hopes to hire new executives to run the operation in the Asian country as well. About 30 of the company's 75 jobs in MetroWest will be moved to China as part of the arrangement, Lampe-Onnerud said.
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