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Workers check products at Contemporary Amperex Technology Co Ltd, the world’s biggest maker of electric vehicle batteries, at the company’s factory in Ningde, southeast China’s Fujian province. Photo: Xinhua

The next electric car battery champion could be European, rivalling giant Chinese supplier CATL

  • The transcontinental drive is fuelled by plans for 27 electric vehicle battery-producing sites across the region this decade
  • Sales of EVs in Europe more than doubled last year to about 1.3 million units, topping China for the first time
With Europe expected to lead the world in electric car sales for a second straight year, an epic rush to build a battery supply chain from scratch is playing out across the continent.
After years of ceding the electric vehicle (EV) battery business to foreign companies, Europe wants in. Prospective manufacturers are popping up in the Nordic region, Germany, France, the UK and Poland in a transcontinental competition to chip away at the dominance of China’s Contemporary Amperex Technology Co Ltd (CATL) and South Korea’s LG Energy Solution.

Fuelled by state support of at least 6.1 billion euros (US$7.3 billion) and investment plans totalling 10 times that in just one year, the race is on for a regional champion to emerge. The contestants include start-ups Northvolt in Sweden, Britishvolt and France’s Automotive Cells Co, and powerhouses Tesla and Volkswagen. BloombergNEF estimates the continent could see its share of global battery production rise to 31 per cent by 2030 from just 7 per cent last year.

“We’re creating a new industry in Europe; we’re creating a completely new ecosystem,” Maros Sefcovic, the European Commission vice-president overseeing the battery initiative, said in an interview. “The investments are really pouring in.”

A rechargeable lithium-ion battery for Volkswagen’s ID.3 electric car is seen at the company’s factory in Zwickau, Germany, on February 25, 2020. Photo: Agence France-Presse

Sefcovic estimated the planned investments just for 2019 to be about 60 billion euros (US$71 billion), triple that being spent in China. Those eye-watering totals cover the entire supply chain, from materials and cells to assembly and recycling.

Amid tougher emissions rules and fines for violating them, sales of EVs -both battery-electric and plug-in hybrid models – in Europe more than doubled last year to about 1.3 million units, topping China for the first time.

That could reach 1.9 million this year as Volkswagen, Stellantis and BMW map out plans for new models and higher output, and Ford Motor Co and Volvo Cars commit to going almost all-electric.

Those ambitions will require a lot of power packs, and the local car industry’s reliance on overseas suppliers grates on political leaders in Germany, France and Brussels. They are loathe to have local carmakers, which are major employers, be reliant on battery makers based outside the region.

A ‘million mile’ battery from China could power your electric car

The clamber to build up local supply chains is palpable. Traditional car-making countries Germany, France, Italy and the UK are especially keen to stay competitive in battery technology and maintain their manufacturing bases. Germany is elbowing its way to the front of the pack, committing as much as 2.6 billion euros to the battery business and luring Tesla, CATL, LG Energy and ACC to set up shop there.

“Every nation wants a battery plant,” said Jean-Pierre Corniou, a former Renault executive now a partner at consultancy SIA Partners.

There are plans for 27 battery-producing sites across the region that could churn out least 500 gigawatt-hours of cells this decade, he estimated.

Volkswagen made a massive bid for the pole position last month by unleashing an estimated US$18 billion plan for six battery factories in Europe – including one in Salzgitter, Germany – and to expand its network of fast-charging stations.

Chinese electric car battery makers out to show the world they have power and quality to go the distance

If all goes as intended, the German carmaker and partners could leapfrog challengers and become the world’s No 2 cell producer behind CATL, according to BloombergNEF.

“Carmakers are realising they would lose out on a lot of added value, so they want to reappropriate the manufacturing process,” Corniou said.

The European Commission set a target of getting at least 30 million zero-emission cars on the roads by 2030, and the ambition is that European factories would cover more than 90 per cent of the demand for batteries.

Volkswagen will plug its own packs into its own cars, leaving wide-open lanes for competing battery makers to nab customers. European carmakers are under pressure to meet stricter European Union emissions rules, and consumer spending is expected to explode as nations emerge from Covid-19 lockdowns.
A worker stands outside a factory of electric vehicle battery maker Contemporary Amperex Technology Co Ltd in Ningde, southeast China’s Fujian province. Photo: Reuters

Battery demand is forecast to be so strong that production barely will keep pace by decade’s end, according to UBS Group analysts.

So the market is there. Yet it will not be easy for the start-ups to catch CATL, Panasonic Corp and LG Energy, all of whom spent years honing operations in Asia and the US before moving into Europe.

CATL, the largest producer of rechargeable cells, will invest 78 billion yuan (US$12 billion) to add about 230 gigawatt-hours of capacity worldwide within the next four years. The Ningde, Fujian province-based Chinese company supplies almost every major global EV brand, and it is expected to start producing in Germany this year.

And then there is Elon Musk. Tesla is the world’s biggest EV maker, selling about half-a-million cars last year, and plans to assemble Model Ys and batteries in Germany to juice its European expansion.

Tesla Model X electric cars recharge their batteries in Berlin, Germany. Photo: Reuters

Musk’s operations are becoming a magnet for EV suppliers and triggering a local industrial renaissance. That expertise is daunting for competitors, said Isobel Sheldon, chief strategy officer for Britishvolt.

“Tesla is the biggest thorn in the side for the European cell-manufacturing base,” she said.

When it comes to the start-ups, Northvolt -founded by former Tesla executives – is years ahead of rivals.

The company has a US$14 billion supply deal with Volkswagen and another with BMW, and is preparing to churn out cells by year’s end at its site in Skelleftea, Sweden. Northvolt wants to grab 25 per cent of Europe’s battery market by 2030, founder and chief executive Peter Carlsson has said.

Volkswagen workers complete an electric car ID.3 body at the company’s assembly line in Zwickau, Germany. Photo: AP

That was before the Volkswagen offensive. Carmakers “are putting more and more efforts behind their electrification plans and have revised their battery needs upwards”, said Jesper Wigardt, a Northvolt spokesman. “We will need to evaluate our target continuously.”

Britishvolt plans to start building a 2.6 billion-pound (US$3.6 billion) factory in northeast England later this year. The site will use hydropower from Norway and could be online by 2023.

The Blyth-based start-up is in talks with EV makers in the UK, EU, US and Japan, she said without elaborating.

Further behind -but flush with public funds for development – is a joint venture between Stellantis and oil giant Total. Instead of starting from scratch, ACC plans to hasten expansion by producing batteries at two former car-parts plants.

“Europe isn’t too late,” said Corniou, the SIA consultant. “The market will be colossal, and there’s a need for competitive technology.”