Panasonic and Samsung will go toe to toe on Lithium battery price war -

The world's two largest makers of rechargeable batteries, Pansonic and Samsung, may deepen price cuts this year as overproduction results in a bigger glut in the industry.

Hideo Takeshita, an analyst at the Institute of Information Technology has told Bloomberg that Panasonic and Samsung may have to knock down their rates - and lithium-ion battery prices may tumble up to 19 percent in 2010. Shiro Mikoshiba, an analyst at Nomura Holdings, added that the worsening oversupply may push prices down as much as 25 percent.

The price drops highlight how battery makers in Japan and South Korea, which account for 75 percent of the global production, may be sacrificing profit for market share as cars with no gas tanks are projected to help triple sales of lithium-ion cells.

While lithium-ion cells are mainly used to power laptop computers and mobile phones, electric vehicles may fuel most of the growth. Sales of batteries in electric, hybrid and plug-in hybrid cars in Japan will increase to 1.7 trillion yen in 2020 from almost zero in 2009, according to March estimates at Daiwa Securities Group Inc.

South Korean battery makers, including Samsung and LG, may better cope with lower prices than Japanese rivals because they purchase materials at a lower price from China and have faster production rates, Takeshita said. The won’s weakness against the yen also makes Korean products more competitive, he added.

Panasonic recently came up trumps in the rechargeable-battery industry with its purchase of Sanyo Electric Co and saw its profits rise by 1.6 percent, compared to Samsung's battery unit which saw sales fall by 4.1 percent. It anticipates the harsh price competition with South Korean makers will continue. He said the company had realigned its production process to strengthen cost competitiveness so it could come up tops.

But it's not out of the woods - those in the know are predicting that Samsung SDI is likely to overtake Panasonic’s Sanyo as the world’s top producer of lithium-ion batteries this year.

LG, the third largest maker of rechargeable batteries, expects price drops to persist. However, it reckons this won’t have a serious impact on the company’s profit because it buys lithium at competitive prices.