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JCI to Launch Facility in Tianjin

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Johnson Controls Inc. (JCI - Free Report) recently divulged a plan to construct a new automotive battery plant in Tianjin, China. With an investment of $200 million, the state-of–the-art-facility will be manufacturing high quality maintenance-free lead-acid starter batteries and advanced batteries, designed for Start-Stop vehicles for automakers and the aftermarket in China.

The construction of the Tianjin plant will start between 2012 and the first half of 2013; with the plant becoming operational in late 2014. The company expects that the plant at full capacity will be producing about 6 million batteries annually.

Johnson Controls estimates that car sales will hit 25 million by 2015. This will be beneficial to the company, helping it meet the growing demand of the automotive industry in China. The company intends to expand battery capacity in China to 30 million by 2017.

Johnson Controls operates in China with its plant in Shanghai being part of the 2005 acquisition and Changxing facility. The company expects that revenues from Power Solutions for fiscal 2012 will escalate 11% to 13% due to market share gains along with a positive impact from production in the Changxing plant. In addition, it is also planning the launch of the Chongqing plant by this year.

Johnson Controls focuses chiefly on the aspects of sustainability with energy saving and emission control. The new project will provide a platform to leverage Johnson Controls' technologies along with expansion in China.

However Johnson Controls faces fierce competition from companies including Tenneco Inc. (TEN - Free Report) , which is also expanding its global footprint in the emerging regions around the world using its manufacturing and engineering capabilities. It has launched new emission control facilities in Changchun and Beijing in China. With the expansion of the OEM in the growing markets like Brazil, Russia, India, China, and Thailand, Tenneco has started producing locally cost competitive products that will lead to growth in its business.

Wisconsin-based Johnson Controls is a supplier of automotive interiors, batteries, and other control equipment. The company functions through three segments: Automotive Experience, Building Efficiency and Power Solutions.

Currently, Johnson Controls retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) “Hold” rating. We have a long-term (more than 6 months) “Neutral” recommendation on the stock.

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