Europe is slowly but surely working to catch up with the world’s largest EV battery producers after it was almost terminally late to the party. After years of neglecting the lack of local battery production capabilities, now the EU has announced yet another consortium in the area, a tie-up among carmakers, energy companies, and others interested in building battery capacity in Europe.
Forbes’ Brussels correspondent Dave Keating reports that the consortium will be funded with US$5.6-6.7 billion (5-6 billion euro), with US$1.34 billion (1.2 billion euro) in the form of subsidies coming from Brussels. The rest will come from private companies.
It’s good news that European companies are investing so heavily in EV batteries, but it’s worth noting the current leaders in this space—China and South Korea—are not exactly standing still. They are building EV battery production capacity in Europe, too.
A Chinese battery maker, CATL, for example, last year announced plans to build a factory in Germany, after it sealed a battery supply deal with BMW. This deal alone, interestingly, is worth more than what private companies have pledged for the new European battery consortium. What’s more, most of the batteries will be made in China, with a minority manufactured at the German site. In other words, the companies that dominate battery supply for European carmakers and their very ambitious EV plans will not let go of the top spot easily.
Yet the Europeans are making an effort in a better-late-than-never push. Construction work on the first gigafactory on the continent may begin soon, after one of the companies behind it, Swedish Northvolt, said it had secured an initial investment of 1.6 billion euros for the start of construction of the first phase of the factory, which will have a capacity of 8 GWh per year. Ultimately, the gigafactory should have an annual capacity of 32 GWh but this would require another US$2.68 billion (2.4 billion euro). Financial and tech backers of the gigafactory include Volskwagen, BMW, ABB, and Siemens.
There are also several other partnerships in the EV battery space, including one for sourcing raw materials, another for battery cell production, and a few others covering chemicals, battery pack design, and even recycling.
The European Union’s support, both financially and regulatory, is a key factor that could go a long way towards ensuring the success of any EV battery-related venture. A while back, Total’s Patrick Pouyanne last November made a scathing remark about this support: he announcedTotal’s battery maker Saft will only invest in production if the central government of united Europe could ensure it could compete with the Asian battery manufacturers. The remark was made after announced plans to begin battery production in 2020, no less, which made it all the more scathing.
More than a billion euro in subsidies for EV batteries could be a good start, but it might not be all the EU will do to encourage more local production of EV batteries. European carmakers have poured billions in future EV production already. While imported batteries are cheap, they are imported, and that makes the importers vulnerable to a variety of risks that could be avoided with more local production. However, this has to be competitive with the Asian imports. The future of the EV batteries in Europe remains quite a conundrum to solve.