UPDATE 1-Fisker, Ener1 break off battery supply talks

Reuters, Thursday January 14 2010
* Fisker, Ener1 unable to reach battery supply deal
* Fisker CEO: Expect battery supply announcement this week
* Ener1 sees growth with Volvo, established carmakers
By David Bailey and Kevin Krolicki
DETROIT, Jan 13 (Reuters) - Fisker Automotive, a venture-capital backed luxury electric carmaker, will announce a battery supply deal for its Karma plug-in hybrid later this week after failing to clinch a deal with Ener1, the company's founder said on Wednesday.
Fisker had been in talks with EnerDel, an Indiana-based unit of Ener1 , but discussions about a lithium-ion battery supply deal but those discussions broke off in recent days, both sides said.
Ener1 Chief Executive Charles Gassenheimer said that his company had decided it would be better off pursuing higher-volume battery supply deals as established automakers begin to roll out electric cars.
"We have some capacity constraints on our side," Gassenheimer told Reuters on the sidelines of the Automotive News World Congress in Detroit.
"The Karma was a low-volume program. We're interested in high volume programs in the future."
Fisker founder and Chief Executive Henrik Fisker said his start-up had been testing EnerDel and other batteries over the past year.
"You will see when we announce our new battery supplier ... all our performance and price targets are going to be hit," Fisker told reporters.
Fisker, which counts Silicon Valley-based Kleiner Perkins Caufield & Byers as an investor, plans to deliver its first Karma models in September.
BOOM MARKET IN PORTABLE POWER
Lithium-ion batteries have long been used in consumer electronics like cell phones and laptop computers.
Now, automakers from start-ups like Fisker to industry giants like General Motors Co[GM.UL] and Nissan Motor Co <7201.t> are readying electric vehicles powered by packs built up from hundreds of lithium-ion cells.
The race to supply those batteries, which can cost $10,000 or more, has emerged as a booming market in the making and one where there is no dominant and established vendor.
Industry estimates project annual sales of up to $25 billion in the next-generation auto batteries by 2015, up from almost none now.
The Fisker Karma, which is designed to travel 50 miles on a single charge and accelerate to 60 miles per hour from a standing start in six seconds, will sell for $87,900.
The Karma will be built in Finland by Valmet Automotive.
Ener1 owns a controlling share in the electric car maker THINK. In addition, it has a deal to convert 22,000 Japanese postal delivery vans for the Japanese postal service provider.
Japanese trading company Itochu Corp <8001.t> invested $20 million in Ener1 in December in exchange for a 2.5 percent stake in the company.
In August, the company received a $118 million grant from the U.S. Department of Energy to build a battery cell plant in Indiana.
Ener1 also is working on electric car projects with Nissan Motor Co <7201.t>, Mazda Motor <7261.t> and Volvo, a unit of Ford Motor Co .
Gassenheimer told Reuters he was confident Volvo would move ahead with its plans for an all-electric C30 even if Ford sells the brand to China's Geely.
"The sale process is only going to be beneficial. If it ends up being the Chinese, they are only going to want to see the technology even more," he said.