A123Systems raises $40M more for car battery, in showdown with EEStor

A123Systems, the Watertown, Mass. company selling high-power lithium-ion batteries, said it has raised $40 million more in a fourth round of funding, bringing the total invested in the company to $102 million.

The funding comes amid increased interest by auto-makers and the public in electric cars, as the nation tries to remove itself from dependency on gasoline. The company has competitors, such as Valence, Saft and Lion Cells, a more secretive company backed by Battery Ventures and Nth Power.

A123Systems has significant traction already, however, in selling to the power tool market. It is developing its technology for hybrid electric vehicles that you can plug into your power outlet to top off your battery each day.

The company will also soon see competition from EEStor, which says its technology will “blow away” A123Systems’ lithium ion technology, and that it will be delivering its technology to a Toronto car-maker, ZENN, this year.

This latest investment in A123Systems was led by General Electric Commercial Finance, and also included new investor Procter & Gamble, a large manufacturer of consumer batteries through its Duracell division. Existing investors also participated, including Alliance Capital, FA Technology Ventures, North Bridge Venture Partners, Sequoia Capital, OnPoint, the Massachusetts Institute of Technology, Motorola, Qualcomm, and Desh Deshpande, the company’s board chairman.

Procter & Gamble said the investment was to help keep Duracell in a leading position, via access to A123Systems’ technology.

A123Systems also said it will supply batteries to General Motors for the Saturn Vue Green Line plug-in hybrid development program, the first such project by a major auto-maker. That car should be ready within the next few years.

In the power tool market, A123Systems already sells to Black & Decker, and that relationship has moved B&D from nickel cadmium technology to A123Systems’ “doped nanophosphate lithium-ion” technology.

A123Systems said it is working with GE to develop a hybrid bus, and received a $15 million development contract for batteries by the U.S. Department of Energy and the United States Advanced Battery Consortium (USABC), an organization composed of DaimlerChrysler Corporation, Ford Motor Company and General Motors Corporation.