Chinese Battery Makers Back Out Of Germany Amidst Cooling EV Demand

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by Tyler Durden
Friday, May 31, 2024 - 09:00 AM

With each day that goes by there is more and more news indicating the EV market is saturated. First it was manufacturers cutting back on EV investments, then a gradual shift back to hybrid vehicles - and now it's China pulling out of investments in Germany due to lack of demand.

Chinese electric vehicle battery producers are scaling back their expansion in Germany due to a drop in EV sales, according to Nikkei Asia

SVOLT Energy Technology, a spin-off from Great Wall Motor, announced the suspension of its planned battery cell plant in Lauchhammer, Brandenburg, attributing the decision to a "new European strategy" and a major order cancellation, reportedly from BMW.

Additionally, SVOLT expressed uncertainty about its factory project in Ueberherrn, Saarland, due to ongoing legal challenges. If impeded, SVOLT's only operational facility in Germany will be a plant in Heusweiler, set to open on July 1, which will assemble battery cells into packs and modules.

Kai-Uwe Wollenhaupt, president of SVOLT Europe said this week: "At SVOLT, in addition to the already low level of planning security at various points -- from the threat of international punitive tariffs to market distortions due to lengthy and unevenly distributed subsidies -- a significant customer project has now also been lost."

The Nikkei report notes that SVOLT's decision follows that of battery behemoth CATL. CATL halted its expansion in Arnstadt after Volkswagen reduced EV production in Zwickau. Instead, CATL is now focusing on a new facility in Hungary.

The decline in Chinese investment in German battery production aligns with Germany's late 2023 decision to end EV purchase subsidies, leading to a drop in electric car registrations to 12.2% in April.

And in Europe, this shift comes amid broader controversies, such as the EU's 2035 ban on combustion engines, which is increasingly criticized by German politicians like Carsten Linnemann of the CDU, who argue it threatens Germany's economic prosperity.

Despite this, major German automakers like Audi, Mercedes-Benz, Opel, and Volkswagen are moving away from combustion engines before the 2035 deadline, while BMW and Porsche have not set specific dates. This backdrop explains the cooling interest in EVs within Germany.

Kai-Christian Moeller, a deputy spokesperson for the Fraunhofer Battery Alliance added: "The cancellation of subsidies made several German automakers push back their plans for an end of production of combustion-powered cars, while the average consumer does not see any cost advantage in driving EVs over gas-powered cars"

Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Bochum, concluded: "Those tariffs would artificially increase the price of electric cars for European consumers, and I have already heard that auto parts suppliers are stopping orders for EV production and that combustion engine plants are being spruced up for a few more years."