Johnson Controls (NYSE:JCI) has signed a supply agreement with XL Hybrid to supply Li-ion batteries that will be incorporated in the latter’s hybrid electric powertrains.  XL Hybrid is a developer of low-cost hybrid electric powertrain, which is integrated with the engine and transmission of a vehicle to save up to 21% on fuel consumption. The electric power train consists of a battery, a motor and an inverter that combine to store energy wasted in braking to reapply it during acceleration to drive up fuel-efficiency.
Under the agreement, Johnson Controls will supply advanced Li-ion battery packs which will be incorporated by XL Hybrid in light duty commercial vehicles, including Chevrolet Express and GMC Savana vans. The business model, though in its initial phases has enormous growth potential. And large scale adoption of the same by industry shall generate a new revenue stream for Johnson Controls.
In addition, the current market size for Li-ion batteries, which are otherwise primarily used in electric vehicles (EVs) is around $2 billion, and this is expected to increase to $14.6 billion by 2017.  Thus, with this agreement Johnson Controls has taken another step in positioning itself better to take advantage of the growth anticipated in the Li-ion battery market over the coming years.
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The electric powertrain technology holds enormous potential
The hybrid electric powertrain technology holds enormous commercial potential. Several commercial operators of large fleet of vans and trucks are keen on saving on rising fuel costs. This technology, which gets incorporated seamlessly with the engine and transmission systems manufactured by original equipment manufacturers, offers a commercially viable solution for the same. XL Hybrid has already sold its hybrid Chevrolet Express vans to some of the biggest commercial van fleet operators in the U.S. under a pilot project. And, a greater adoption of the same by the industry shall add to growth in top line of both XL Hybrid and Johnson Controls.
Li-ion battery industry landscape
Also, the Li-ion battery that Johnson Controls will supply to XL Hybrid has 1.8 kilowatt-hours (kWh) of energy storage, peak discharge power rating of 50 kW, and nominal voltage of 260V. The company is a leading manufacturer of Li-ion batteries globally. Other major manufacturers include, LG Chem, GS Yuasa, AESC, A123 Systems, Panasonic Group, SB LiMotive, Hitachi Vehicle Energy, BYD and Electrovaya. 
The company will supply the batteries to XL Hybrid from its manufacturing facility at Holland, Mich., and the hybrid Chevrolet Express and GMC Savana vans featuring the hybrid electric powertrain technology comprising of these batteries shall go for sale in 2013.Notes: