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With Europe expected to lead the world in electric car sales for the second year in a row, an epic race is unfolding to build a battery supply chain from scratch across the continent.
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After years of handing over the electric vehicle battery business to foreign companies, Europe wants to get in. Potential manufacturers are popping up in the Nordic region, Germany, France, the UK and Poland in a transcontinental competition to end China’s dominance. Contemporary Amperex Technology Co. Ltd. and South Korea LG Energy Solution.
Fueled by state support of at least 6.1 billion euros ($ 7.3 billion) and investment plans that add up to 10 times that in just one year, the race is on for a regional champion to emerge. Contestants include startups Northvolt AB in Sweden, Britishvolt Ltd. and France Automotive Cells Co. and Power Plants Tesla Inc. and Volkswagen AG. BloombergNEF estimates that the continent could see its share of global battery production rise to 31% by 2030 from just 7% last year.
“We are creating a new industry in Europe; we are creating a completely new ecosystem, ”Maros Sefcovic, vice president of the European Commission who oversees the battery initiative, said in an interview. “The investments are really coming.”
Sefcovic estimated that planned investments for 2019 alone will be about 60 billion euros ($ 71 billion), triple what is spent in China. Those dazzling totals cover the entire supply chain, from materials and cells to assembly and recycling.
Amid stricter emissions rules and fines for violating them, sales of electric vehicles – both battery-electric models and plug-in hybrids – in Europe more than doubled last year to around 1.3 million units, surpassing China. for the first time.
That could reach 1.9 million this year as VW, Stellantis NV and BMW AG map out plans for new models and increased production, and Ford Motor Co. and Volvo Cars commit to going almost entirely electric.
Those ambitions will require many energy packages, and the local auto industry’s reliance on foreign suppliers affects political leaders in Germany, France and Brussels. They hate that local automakers, which are the main employers, depend on battery manufacturers outside of the region.
The climb to build local supply chains is palpable. Traditional car manufacturing countries Germany, France, Italy and the UK are particularly interested in remaining competitive in battery technology and maintaining their manufacturing bases. Germany elbows its way to the front of the pack, committing up to 2.6 billion euros to the battery business and attracting Tesla, CATL, LG Energy and ACC to settle there.
“Every nation wants a battery plant,” said Jean-Pierre Corniou, a former Renault SA executive who is now a partner at consultancy SIA Partners.
There are plans for 27 battery production sites across the region that could produce at least 500 gigawatt-hours of cells this decade, he estimated.
VW made a massive bid for pole position last month by launching an estimated $ 18 billion plan for six battery factories in Europe, including one in Salzgitter, Germany, and expanding its network of fast-charging stations.
If all goes according to plan, the German automaker and its partners could outperform rivals and become the best in the world. Second cell producer behind CATL, according to BNEF.
“Automakers are realizing they would lose a lot of added value, so they want to take ownership of the manufacturing process,” Corniou said.
The European Commission set a goal of putting at least 30 million zero-emission cars on the road by 2030, and the ambition is for European factories to cover more than 90% of battery demand.
Read more: VW plans to be the battery giant in a $ 29 billion response to Tesla
VW will plug its own packs into its own cars, leaving lanes open for competing battery makers to snag customers. European automakers are under pressure to meet the European Union’s stricter emissions standards, and consumer spending is expected to rise as nations emerge from Covid-19 lockdowns.
Demand for batteries is forecast to be so strong that production will barely keep up at the end of the decade, according to analysts at UBS Group AG.
So the market is there. However, it will not be easy for startups to capture CATL, Panasonic Corp. and LG Energy, who spent years perfecting their operations in Asia and the United States before moving to Europe.
CATL, the largest producer of rechargeable cells, will invest 78 billion yuan ($ 12 billion) to add about 230 gigawatt-hours of capacity worldwide over the next four years. The Ningde, China-based company supplies nearly every major electric vehicle brand in the world, and is scheduled to begin production in Germany this year.
And then there is Elon Musk. Tesla is the The largest electric vehicle maker, which sold around half a million cars last year, and plans to assemble Model Y and batteries in Germany to fuel its European expansion.
Musk’s operations are becoming a magnet for electric vehicle providers and sparking a local industry. Renaissance. That experience is overwhelming for competitors, said Isobel Sheldon, Britishvolt’s chief strategy officer.
“Tesla is the biggest thorn in the side of the European cell manufacturing base,” he said.
Read more: The end of Tesla’s dominance may be closer than it seems
When it comes to startups, Northvolt, founded by former Tesla executives, is years ahead of its rivals.
The company has a $ 14 billion supply agreement with VW and another with BMW AG, and it is preparing to produce cells by the end of the year at its Skelleftea site. Northvolt wants to seize 25% of Europe’s battery market by 2030, said CEO and founder Peter Carlsson.
That was before the VW offensive. Automakers “are putting more and more effort behind their electrification plans and have revised up their battery needs,” said Jesper Wigardt, a Northvolt spokesman. “We will have to evaluate our objective on an ongoing basis.”
Britishvolt plans to start building a 2.6 billion-pound ($ 3.6 billion) factory in northeast England later this year. The site will use hydroelectric power from Norway and could be online in 2023.
The Blyth-based startup is in talks with electric vehicle makers in the UK, the EU, the US and Japan, it said without elaborating.
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Further back, but full of public funds for development, there is a joint venture between Stellantis and the oil giant Total SA. Rather than starting from scratch, ACC plans to accelerate expansion by producing batteries at two former auto parts plants.
“Europe is not too late,” said Corniou, the SIA consultant. “The market will be colossal and competitive technology is needed.”
– With the assistance of Eddie Spence and Niclas Rolander