A123 Systems Withdraws From Fiat 500 EV Project, Cites Below-Market Competition

A123 Systems Withdraws From Fiat 500 EV Project, Cites Below-Market Competition

A123 Systems has withdrawn from the Fiat 500 electric vehicle project to, stating that another battery supplier had entered the picture and that the scope of the program had shrunk, the Detroit Free Press reported today.

A123 CEO David Vieau told the newspaper that a competing supplier came forward who was "willing to buy the business below current market price in a program which has significantly diminished in scale from our earlier expectation."

Last March, Chrysler and A123 announced plans to start producing an undisclosed number of battery-powered Fiat 500 EVs in 2012 at Chrysler's Toluca, Mexico, factory where assembly of gasoline-engine 500s will begin late this year.

The announcement came one day after the Watertown, Mass., battery maker reported a second-quarter loss of $34.2 million, compared with a loss of $21.9 million a year earlier.

Chrysler spokeswoman Katie Hepler said that "A123 has been a good development partner in this program and we appreciate their support. We have nothing else to announce at this time."

It's unclear whether this change will delay the launch of the Fiat 500 EV, the Free Press reported. Chrysler is behind Ford, General Motors and Japanese automakers in both gasoline-electric hybrids and all-electric vehicles.

While Chrysler declined to identify the new supplier, Canada's Electrovaya is supplying lithium-ion batteries for a test fleet of about 140 plug-in Dodge Rams. Former Chrysler President Tom LaSorda is a director of Electrovaya.

Those battery-powered trucks will mate a battery with Chrysler's 5.7-liter Hemi V8 engine. Chrysler has said that the trucks will be able to travel 20 miles on battery power alone. The program is funded through a $48-million U.S. Department of Energy grant.

Scott Doggett:  is an AutoObserver.com Associate Editor.