General Electric Company
) intends to expand its growing industrial-battery business in
order to generate $1 billion in annual revenue by the end of 2020.
This expansion plan also reflects CEO Jeff Immelt's goal of
generating $500 million a year from the industrial battery business
The global battery market values approximately $50 billion, out
of which the U.S. is the single biggest market in the world with a
market size of $5 billion annually. Demand is expected to grow
substantially in the next five years.
The industrial battery business is a market with good potential.
Since customers generally order in bulk for ongoing production
activity, customer acquisition is a focus area. A few good
customers ensure a steady revenue stream, allowing better alignment
with the fixed cost structure, which in turn allows better cost
absorption. GE has already received its first order for batteries
from a South African engineering company, Megatron Federal, which
requires 6,000 pieces for use as backup power supplies at
GE now plans to invest $170 million in a new factory, which is
up from the $100 million it initially expected to spend on the
manufacture of batteries.
The new plant is located in New York and will employ
approximately 450 people. For construction of the plant, GE
received $15 million from New York State authorities and $5 million
from local officials.
However, the new factory is not GE's only investment in battery
technology. The company also has a stake in
A123 Systems Inc.
), a maker of lithium-ion batteries used in electric and hybrid
General Electric currently holds a Zacks Rank of #3, which
implies a short term Hold rating on the stock.
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