China's BYD takes aim at Tesla in battery factory capacity race

Chinese automaker BYD Co, backed by Warren Buffett's Berkshire Hathaway Inc, aims to triple its production of batteries as it takes on Tesla Motors in the race to supply electric vehicles and boost energy storage.

Shenzhen-based BYD plans to add 6 gigawatt hours of global production for batteries in each of the next three years, and hopes to keep adding at that pace afterward if demand is solid, Matthew Jurjevich, a spokesman for the company, said on Friday.

That means BYD could ramp up from 10 GWh capacity at the end of 2015 to about 34 GWh of batteries by the beginning of 2020. This would put it about even with Tesla's planned $5 billion Nevada gigafactory.

The companies are fast emerging as two of the key players in the nascent electricity storage sector. Storage technology is considered critical to integrating large amounts of renewable energy because it can absorb excess power from wind farms or solar panels and keep that for use when conditions don't allow for power generation.

"We have demonstrated that BYD is capable of adding 6 GWh every year with strong market demand," Jurjevich, who works for BYD's US unit, said in an interview.

The sector has attracted Tesla, BYD and a range of start-ups as well as stalwart battery manufacturers and is expected to grow to $1.5 billion by 2019 from $128 million in 2014 in the US alone, according to GTM Research.

BYD, which declined to provide investment budgets, ended with 4 GWh of capacity in 2014 and will be at 10 GWh later in 2015. The US energy storage market is expected to triple in 2015 to 220 MW, according to GTM.

Most of BYD's production is in China, but the company is opening a major new factory in Brazil in 2015 that will contribute meaningfully to output in 2015, Jurjevich said.

BYD, which started out making mobile phone batteries, will also scale up manufacturing in the US as demand for its batteries increases, he noted.

According to data published in 2014 by Lux Research, BYD is the sixth-biggest manufacturer of batteries for hybrid and plug-in vehicles. Panasonic Corporation, which makes cells and batteries for Tesla, is the biggest.

Tesla, founded by entrepreneur Elon Musk, has said it will launch its own production of battery cells in Nevada in 2016 and reach 35 GWh of capacity by 2020. Tesla does not currently produce battery cells, according to a company spokeswoman.

BYD opened two manufacturing plants in Southern California in 2013 to produce both electric buses for public transportation and batteries.

The company shocked many in 2003 when it launched its automotive business and has since become one of China's most successful automakers.

Outside of China, however, it has focused on selling buses rather than cars.