February 26, 2014 at 1:00 am

BASF bets research on growth in EV market

BASF CEO Kurt Bock is willing to invest even though the payback may take time. (DANIEL ROLAND / AFP/Getty Images)

Burning cars and bankruptcies have marred the market for batteries powering electric vehicles. That isn’t deterring the world’s biggest chemical maker BASF SE from investing in the space.

The German company is betting customers will flock to electric cars, using its chemical products to create a battery that will enable vehicles to run longer. BASF, with an annual 1.7 billion-euro ($2.3 billion) research budget, has made battery materials one of 10 areas it’s targeting for growth.

“We are committed,” Adrian Steinmetz, head of global business management at BASF’s battery materials unit, said in an interview at the company’s headquarters in Ludwigshafen. “Having this long-term strategy is typical of BASF. It’s the reason why this company has existed for 149 years.”

The push underscores a willingness by Chief Executive Officer Kurt Bock to invest into a market where the payback may take time. Some rivals have dropped out amid sluggish demand for electric cars and image problems after fires broke out in some vehicles made by premium electric-auto maker Tesla Motors Inc.

Germany’s second-biggest chemical company Evonik Industries AG is seeking a buyer for its battery activities including a joint venture with Daimler AG. Six years ago, the company said it wanted to become Europe’s leading producer of lithium-ion battery components. In October, Chief Executive Officer Klaus Engel said the company was abandoning the project.

“The electric auto market was expected to soar in the direction of the sky,” Joachim Krotz, partner at advisory firm Oliver Wyman, said in an interview. “But all of that didn’t come true. The increase of battery capacity is taking so long. They are still too heavy. They still lack power.”

To become a major supplier for electric cars, BASF needs to challenge the dominance of Asian market leaders Mitsubishi Chemical Holdings Corp., Sumitomo Chemical Co. and Ube Industries Ltd. Those companies have an advantage in lithium-ion technology, crucial in car batteries and helped by their proximity to the region’s booming electronics, computer and phones industries.

The U.S. market highlights how difficult it can be to compete with Asian manufacturers. President Barack Obama is trying to promote an electric vehicle and battery industry in the U.S. via a $2.4 billion grant program to local companies. Chinese rivals ultimately took over some U.S. companies and have received government support.