Germany has plans to become a leader in electric transportation. But there’s always been one major problem with that plan: how to power the cars. And in particular, where to get the batteries to power the cars.
Up until now, the battery manufacturing sector has been dominated by Asian firms — Japan’s Panasonic, South Korea’s Samsung and China’s BYD and CATL are all market and technology leaders. Up until relatively recently, when CATL announced they would start manufacturing in Germany, BMW, Daimler and the like were getting e-car batteries shipped to Europe on a just-in-time basis.
The biggest automotive manufacturers in the country all wanted e-car batteries made in Europe — but none of them wanted to get involved themselves. Daimler, the maker of Mercedes cars, got out of the business, Bosch didn’t even want to start and BMW has just awarded a billion-euro contract to the new CATL factory in Erfurt, eastern Germany. The competition was too tough and too advanced and the financial risks too high, according to the German auto industry — and this is all despite the fact that many analysts have warned of German car companies becoming too dependent on batteries made elsewhere.
Now Elmar Degenhart, the chief of Continental, one of the world’s largest auto-parts suppliers, is coming to their rescue. In an interview with Handelsblatt, Mr. Degenhart describes battery production as a possible option for the company.
“We recently announced a joint venture with a Chinese company, CITC,” he explains. “The joint venture, in which we hold a majority, will focus on bringing a 48-volt system to market. We have the systems competence, CITC has the battery-making competence, when it comes to lithium-ion batteries. This makes cooperation logical and attractive.”
But in fact, Mr. Degenhart doesn’t believe that the lithium-ion batteries, which currently dominate the e-car market, are his end game. Of course, you can make money with these at the moment and Continental won’t wait around for the right technology to arrive, he says. But at the same time, as an engineer by training, Mr. Degenhart wants to wait for the next generation of batteries, those which he believes will replace the lithium-ion ones: solid state batteries.
Solid-state batteries weigh less and take up less space and are likely to have double the energy density of lithium-ion cells. Even though lithium-ion batteries are improving massively, solid state batteries are seen as the holy grail of e-car cells because they’ll hold more charge for longer and be smaller and safer.
“The first [lithium-ion battery] with 500 watt-hours is going to be on the market soon,” Mr. Degenhart continues. “But even that won’t be enough to make e-cars competitive. We have to get up to 1,000-watt hours. That will only happen with solid state batteries.”
‘We need the government’s help’
Mr. Degenhart estimates the cost of building one factory to produce these at just over $3 billion (€2.56 billion). At Continental they have run the numbers, he says, and by 2050, if 70 percent of all cars being made were electric, then the world would need 160 of what are known as gigawatt factories. But the start-up phase won’t begin properly until sometime between 2025 and 2030.
“Anyone who wants to get involved in this needs to be sure that their investment is going to bring returns,” Mr. Degenhart points out.
Continental’s biggest competitor, Bosch, have already decided it’s not worth it. “We spent a lot of money and took a lot of time to really look into this major strategic question,” Bosch head, Volkmar Denner, told Handelsblatt. “But at the end of February we decided against it and we’re sticking with that decision.” To gain a 20 percent market share you’d have to spend at least €20 billion, he notes. Not even the offer of government funding could change the Bosch decision.
Mr. Degenhart believes European battery production can only happen if European governments get involved. We are always being criticized for doing too little in this area, the Continental boss notes. “But just compare the conditions in China and Europe. In China, battery cell producers are supported and protected intensely by the government. It doesn’t have much to do with free trade. What we need is much more intensive state support, particularly with research and development.”
The German Chancellor Angela Merkel and several of her ministers have already expressed a desire for a European battery factory and mooted the idea of more funding for research.
These may sound like ambitious plans. But according to Mr. Degenhart, remaining successful in the auto industry of the future is going to depend which technologies you place your bets on. For example, he doesn’t think everyone will be driving e-cars. “We will see a mix of technologies,” he notes — synthetic fuels will be used more by long-distance transports and even hydrogen-powered cars might be interesting at some stage. “But only after 2030,” he cautions.
Of all of Continental’s business, it’s the motor business that is least stable right now. There’s a lot of disruptive technology around, Mr. Degenhart says. “Which technologies are available and economically viable — that’s going to play a decisive role. That is why we need to be faster and more agile.” This is why Continental is going to make the engine unit even more independent from the rest of the company, with plans to bring it to the stock market in the middle of next year.
“The auto industry used to be purely about hardware. It was only in the 1980s that we started to put more electronics into cars,” Mr. Degenhart says. “But now we develop some projects for customers that are 70 to 80 percent about the software.”
“One thing has become very clear: Nobody in this industry will be able to do everything alone,” Mr. Degenhart concludes. “The functions and systems are so complex that we need to cooperate.”
Markus Fasse reports on aviation and the automobile industry from Munich. Kirsten Ludowig covers companies and markets for Handelsblatt. Cathrin Schaer adapted this story for Handelsblatt Global. To contact the authors: email@example.com, firstname.lastname@example.org.