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Why Is Johnson Controls Banking On China For Its Absorbent Glass Mat Batteries?

Johnson Controls ( JCI ) recently announced plans to form a joint venture with Binzhou Bohai Piston Co. , an auto parts affiliate of Beijing Automotive Industry Group Co. (BAIC Group), to build its fourth automotive battery plant in China. This plant will manufacture both conventional flooded, and absorbent glass mat ( AGM ) battery technologies. AGM, which powers start-stop systems, 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. In the China market there is a large demand for auto part technologies that can improve fuel efficiency, and the demand for AGM batteries is expected to soar, as they increase fuel efficiency by up to 5%.

The new facility in Binzhou, Shandong Province, reflects an investment of over $200 million, the construction of which will begin in 2017, with production starting two years later. Once up and running, the plant is expected to produce 7.5 million batteries per year. Johnson Controls has been well-established in the largest automotive market in the world for decades, through joint ventures and strategic partnerships with Chinese companies, as well as its own plant openings. It entered the Chinese automotive battery supply market in 2005, and set up two manufacturing plants in Chongqing and Changxing. The plant in Chongqing city reflects an investment of $154 million and produces 6 million automotive batteries a year. Johnson Controls also increased production of AGM batteries in its Changxing facility , from 1.5 million to 3.4 million per year. Its third battery manufacturing facility is in the city of Shenyang, with an investment agreement of a $200 million plant. The production in this facility is expected to begin in 2018, with a capacity of six million automotive batteries. The company has also started establishing a second worldwide headquarters office in Shanghai, expected to open in 2017.

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