Why Is Johnson Controls Increasing The Production Of Its Absorbent Glass Mat (AGM) Batteries?

Johnson Controls (NYSE:JCI) recently announced plans to invest $445 million to boost the output of its Absorbent Glass Mat (AGM) batteries. These are technologically advanced car batteries that are more expensive than a conventional lead acid battery, but are better equipped to handle the strain of frequent engine restarts and the ever-increasing load placed on car batteries. They are employed in vehicles with the start-stop technology, which, while being fuel-saving, can tax a car battery since the electrical system still uses the energy from the battery when the vehicle turns off. Of the investment, $245 million will be expended to double its battery output in North America by investing in existing plants, and $200 million will go towards building a new battery plant in China. JCI also stated that it plans to invest a total of $780 million globally by 2020 to increase the production of these batteries.

The fuel savings with the start-stop technology is one of the main drivers for its increased adoption. Under average driving conditions, savings amount to 3% to 5%. However, with a high number of stops and with traffic lights staying red for extended periods, the figure can rise to 10%, according to Robert Fascetti, vice president for powertrains at Ford. Car manufacturers are also under intense pressure to meet strict fuel economy standards by 2025, and with the increased fuel efficiency of AGM batteries, this technology is destined to be in a majority of cars in the next few years.

Currently, this technology is present in 10% of the U.S. and between 5% and 10% of the Chinese market. This figure is expected to rise to 50% during the next five years, according to Alex Molinaroli, CEO of Johnson Controls. It has a much wider presence in Europe already, comprising as much as 60% to 65% of the market currently. By 2020, 85% of all new vehicles in Europe are predicted to be powered with start-stop batteries. In Europe, JCI has in the past invested over $112 million in its facility in Hannover, Germany, to grow the production of AGM batteries by 65% since 2011. A similar investment was also made to expand its Zwickau plant, making it the largest production site for AGM batteries.

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