Britain’s Battery-Car Boost to Wean Johnson Matthey Off Engines

One of the biggest U.K. companies in line to get a boost from Boris Johnson’s ban on combustion engines is still attached to them for the time being.

Johnson Matthey Plc has been looking to break into the electric-vehicle market with a cathode material called enhanced lithium nickel oxide, or eLNO, that would boost energy density and enable battery makers to use less cobalt. Carmakers are likely to use the technology along the way to complying with Johnson’s accelerated phase-out of cars that run entirely on gasoline or diesel.

It’s a promising product line, though it probably will grow at the expense of the significant business Johnson Matthey does now supplying the catalytic converters carmakers use to clean exhaust emissions from their combustion engines. Getting production of eLNO going in 2024 also won’t be cheap. The company just increased its projection for how much commercialization will cost by almost 60%, to 550 million pounds ($727 million).

“Given the huge amounts of capital being committed to eLNO, management must be far enough advanced in testing to have visibility on pricing and returns,” said Sebastian Bray, an analyst at Berenberg. “It’s no longer possible to plausibly dismiss eLNO as a mere curiosity.”

In the meantime, Johnson Matthey is honing the nickel-rich cathode in household appliances. Battery-powered consumer goods are a useful testing ground for developing the product and finding out how best to scale up, Chief Financial Officer Anna Manz said in an interview. While leading carmakers are running tests with eLNO, appliance projects already have progressed to the cell prototype stage.

“With household appliance manufacturers, it’s much faster to get through the validation process,” she said on Thursday. “The OEMs are much more risk-averse as the cost of a recall is enormous.”

Earlier this year, Johnson Matthey secured 135 million euros ($160 million) in loans to help finance the construction of its first cathode factory in Poland. Manz said a move to streamline the engine-catalysts business into five major hubs can be accelerated if EV demand surges.

Johnson Matthey and Germany’s BASF SE are racing to close the gap with Belgian rival Umicore SA, a key player in the battery-materials market.

©2020 Bloomberg L.P.

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