The Demise of Johnson Matthey’s Battery Business Doesn’t Worry the Industry. It Should.

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The Demise of Johnson Matthey’s Battery Business Doesn’t Worry the Industry. It Should.

In 2016, Johnson Matthey, the two-century-old metals company, embarked on a fundamental makeover. This stodgy pillar of the U.K.’s long industrial past, selling devices that detoxify the exhaust fumes of combustion automobiles, set out to transform itself into a cool avatar of new energy technology. Its first product would be a powerful next-generation electric vehicle battery. 

It all came together early this month, when the company got an unusual opportunity to dramatize its new look. At the high-profile global climate talks in Glasgow, a U.K. racing team unveiled the world’s first two-seat electric Formula race car—festooned with the name of Johnson Matthey, innovative maker of the high-nickel battery powering it. Among those who stopped by for a look was Prime Minister Boris Johnson. Christian Gunther, head of Johnson Matthey’s battery unit, proclaimed in a statement that the race car would “provide a stunning next step in bringing our ground-breaking technology to market.”

But just ten days later, the company had something very different to say about its battery: It was getting out of the business. The costs were too high, Johnson Matthey said, the profit margins in battery electrodes too low, and the competition too formidable. CEO Robert MacLeod, who had long predicted a respectable profit against the incumbents from China and Europe, now said that the best thing to do was to stand aside and sell the battery business, focusing on hydrogen energy instead. The company’s share price tanked, dropping 19% almost immediately.

Strangely, Johnson Matthey’s abrupt exit from one of the hottest sectors of our times didn’t seem to baffle or trouble the rest of the global battery community. In conversations over the past week, executives of rival electrode companies and industry analysts told me the Johnson Matthey failure shouldn’t scare off any other company. The Britons had ultimately bet on the wrong technology—a lithium-nickel-oxide formulation that faced stiff competition from other high-nickel cathodes—and simply wasn’t good enough.

But this portrait does not feel right. There is considerable reason to think that, months or years from now, the battery industry and the investors watching it will remember the demise of Johnson Matthey’s battery business as a red flag moment.