European politicians want to kickstart local production of e-car batteries, but they might shoot themselves in the foot.
EU incentives, ranging from subsidies to cutting red tape, might end up boosting US and Asian battery cell producers instead of European firms. Several companies from America, China and South Korea signaled interest to authorities in Brussels to build up manufacturing in Europe, people familiar with the matter said.
Asian producers such as LG Chem, Samsung, Panasonic and BYD currently control almost 90 percent of the global battery market, which is seen as a threat for Europe’s car industry. Batteries are a crucial part of electric vehicles. If e-cars become a mass commodity, which analysts predict, the importance of European car suppliers could fall and jobs may be at risk. Volkswagen, Mercedes, BMW, Peugeot and Renault all want to make and sell more electric cars and they typically buy batteries made in Asia.
Politicians in the European Union have launched a so-called “battery alliance” in Europe to reduce this dependency. An alliance of politicians, chemicals makers and car companies is looking at options to boost local production that can compete with Tesla’s Gigafactory, a 35-gigawatt joint venture with Panasonic based in Nevada, and Asian rivals.
The European Union and Germany’s federal economy ministry want several Gigafactories to be built in Europe in the near future. More than 10 of those will be needed to meet the expected demand of 200 gigawatt-hours by 2025, Maroš Šefčovič, the European Commission vice-president responsible for energy issues, said after meeting representatives of 15 EU member states in Brussels on Monday.
Whether non-European companies will be eligible for receiving EU support is still unclear. If they end up being entitled to subsidies, however, they could scupper the EU’s plans to create local champions. Korea’s LG Chem is already building a battery factory in a special economic zone in Wroclaw, Poland, benefiting from local incentives. The plant, scheduled to start production by the end of the year, is close to the German border and would be Europe’s largest battery facility to date.
Two potential European beneficiaries of EU support are German startup TerraE and Sweden’s Northvolt. If Brussels awards money to US or Asian rivals, the startups will find it more difficult to get their business on par with the competition.
TerraE is planning to launch production in 2019 and have two plants with a total capacity of 34 gigawatts by 2028. The Swedish startup, led by former Tesla executive Peter Carlsson, aims to produce batteries with 32 gigawatt-hour capacity by 2023. Northvolt, which has attracted a €10 million investment from VW’s truck subisidiary Scania, received approval from the European Investment Bank (EIB) on Monday for a €52.5 million loan. Northvolt will use the money for a demonstration plant to build lion-ion batteries.
The European Commission, for its part, is taking its time: It will only announce in May its measures to boost local battery production.
Till Hoppe is a Handelsblatt correspondent in Brussels, covering the European Union. Silke Kersting reports for Handelsblatt from Berlin, focusing on consumer protection, construction, environmental policy and climate change. Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. Gilbert Kreijger is an editor with Handelsblatt Global. To contact the authors: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org and email@example.com