As the growth of emobility continues apace, Europe is looking to develop its own green car industry – but to do this it will have to considerably scale-up its production of lithium-ion batteries, alongside dealing with stiff competition from the leading global economies.
BYD, the Chinese electric vehicle giant, is just one of the overseas investors putting up a challenge to the burgeoning European electric vehicle (EV) industry by launching battery production in Europe.
As yet, BYD has not confirmed where its European site might be based, but it is by no means the first Asian supplier to mount a challenge to Europe’s EV makers. Korea’s SK Innovation, Japan’s GS Yuasa Corp and China’s Contemporary Amperex Technology are also looking to establish plants across the continent. Meanwhile South Korea’s LG Chem and Samsung SDI will both be opening factories in the near future, and China’s GSR Capital already produces battery cells at the UK plant it purchased from Nissan.
But there is not just China to consider: news on the grapevine from June this year was that Elon Musk’s US electric carmaker Tesla was weighing up Germany as the location for its first European Gigafactory. If it goes ahead, this would be Tesla’s second German site.
A European battery industry
The announcements from BYD and Tesla come after warnings from European Commission Vice-President Maros Sefcovic, who stressed the need for Europe to make advancements in the battery market or face being left behind: “Batteries are a strategic component of our competitiveness and to capture a new European market worth €250 billion annually as of 2025, we need to act fast because we are in a global race. We need to prevent technological dependence on competitors.”
Whether or not Europe is able to develop its own, globally competitive EV car industry, it is clear that this is the direction the automotive industry as whole is headed. According to metal consultants CRU, electric and hybrid vehicles are expected to account for 30 per cent of the global automotive market by 2030.
Up to now, Europe’s carmakers have been relying on imported batteries from China, but if the Commission’s plans for a fully independent industry are to come to fruition, it is vital that in the future these are manufactured closer to home.
The Commission’s plans have called for an investment of €110 million in battery research, with help for individual projects from a €2.7 billion EU innovation fund and the establishment of an EU ‘green battery’ trademark. Last year we learned that the European Commission had launched an Alliance of local companies to build 10–20 huge battery factories. Its immediate objective is to create a competitive manufacturing value chain in Europe with sustainable battery cells at its core. Major industrial actors within the Alliance include Sweden’s Northvolt, France’s Saft and Germany’s Terra-E.
Frankfurt-based TerraE announced in January this year that it has formed a consortium of 17 companies and research institutions to handle the planning for two large-scale lithium-ion battery cell manufacturing facilities in Germany. TerraE will build and operate the factories, where customers can have batteries produced to their own specifications. Following on from this, in Feburary the battery maker Saft, part of energy group Total, announced it had formed an alliance with European partners Siemens, Solvay and Manz to research, develop and build a new generation of batteries.
So far, only Sweden’s Northvolt is actively building a lithium-ion battery factory in Europe. The project – the brainchild of former Tesla employee Peter Carlsson – will be a demonstration plant that could, the company hopes, lead to the construction of a larger-scale lithium-ion factory elsewhere in the country. This would be the largest battery factory in Europe, capable of producing 32 GWh of battery capacity each year.
But other European manufacturers have instead opted to strike deals with Asian suppliers in Hungary and Poland. Germany’s BMW says it will not be involved in the European Battery Alliance, while Volkswagen says it is planning to buy batteries from South Korean LG Chem’s Polish factory due to open later in 2018.
Scaling up
It’s obvious that Europe has many challenges to face in this area. Simon Webber, lead portfolio manager on the global and international equities team at Schroders, pointed out that, “In battery manufacturing... it’s very much about scale. So the established producers in Korea, China and Japan have clear advantages over new entrants.”
Meanwhile Tim Crockford, who manages Hermes Investment Management’s Impact Opportunities Fund, said he was more interested in European firms researching cathode technology, areas with major barriers to entry in terms of research and development. And there have been investments in this area: the Belgium-based materials technology and recycling group Umicore has recently selected a site in Poland for its first production plant to manufacture cathode materials for the European rechargeable battery market.
But there are more optimistic voices too. Timo Moeller, head of the McKinsey Center for Future Mobility overview in Cologne, has pointed out that, “The development cycle and the speed of technology progress in batteries is so huge at the moment, there’s an opportunity for new and additional players to enter.”