The common theme from A123 Systems (NAS: AONE) over the last two years has been disappointment, a trend that may continue after one of its most important customers canceled development of a new vehicle.

When the company reported earnings in May, it touted a ramp-up in production from Fisker Automotive, BMW, Daimler, and Navistar as a reason to be optimistic. Nine months later those hopes have evaporated, along with investors' money.

This week, the company got bad news when it's most important customer, Fisker Automotive, said it stopped work on a new vehicle. Project Nina was supposed to be a less expensive car than the Fisker Karma, a car similar to Tesla's (NAS: TSLA) Model S, which the company is increasing production of right now. But Fisker's Department of Energy loan hasn't been approved because the company hasn't met certain milestones. With greater loan scrutiny because of bankruptcies from other recipients, I wouldn't expect approval anytime soon.

The slow EV ramp has been hard on A123 Systems because it is relying on other manufacturers to increase production and the customer adoption rate to increase. Fisker was the big hope because, like Tesla, the company competes in a higher-end market where adoption seems to be higher. The one other company A123 Systems can consistently rely on to make electric vehicles is Smith Electric, but the company has source batteries from both A123 and Valence Technology (NAS: VLNC) , so demand won't be as high.

Is this the last leg?
Battery companies have built too much capacity too quickly, betting on electric vehicle adoption. That has led to competitor Ener1 filing for bankruptcy and A123's struggles with unutilized capacity. But after all of this bad news, is it time to completely write the company off?

Institutional investors just dumped another $25.4 million into the company last month, so they have hope for improvements. The company had $226 million in cash at the end of the third quarter, and even after a large cash burn in the fourth quarter it should still have a big cushion.

The loss of some potential demand from Fisker has me concerned, but I'm willing to take a contrarian long-term view. Revenue has been growing rapidly and if A123 Systems can survive long enough for electric vehicles to ramp up and grid backup to begin installing in larger quantities, this could be a long-term winner. As fellow Fool Alex Planes pointed out, the ramp-up may take longer than expected, but EVs aren't as disappointing as you might think.

The risk is too high for me to put my cash behind it right now, but I'll keep the stock on My Watchlist for any new developments.

At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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