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Is Germany too slow to back electric car battery cell production? | Business| Economy and finance news from a German perspective | DW

13. November 2018
in Business
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Is Germany too slow to back electric car battery cell production? | Business| Economy and finance news from a German perspective | DW
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To say that Asian countries dominate the production of electric car battery cells is an understatement. According to a 2014 European Commission report, Asian manufacturers have achieved an insurmountable 88 percent share of global Lithium-ion manufacturing capacity — with more than 50 percent belonging to China alone.

Over the past four years, South Korea, Japan and China have ramped up their battery-cell manufacturing capacities to cope with exponential demand for electric vehicles (EVs), while most manufacturers in Europe hesitated due to tight margins and the huge investment required.

That is until Tuesday when Germany’s economic affairs minister Peter Altmaier announced the government would set aside €1 billion ($1.2 billion) to support the production of next-generation solid-state batteries in Europe.

Speaking at a two-day electromobility conference in Berlin, Altmaier said it was important the German state offer its full support to the venture “as was the case with the development of Airbus and Ariane [space program].”

Read more: BMW’s huge battery order adds to EU controversy

  •  Picture of a design proposal of Northvolt's battery factory

    Battery cell production: Is Germany coming too late to the party?

    Northvolt’s mammoth project

    Headed by a former Tesla executive, Swedish company Northvolt aims to build Europe’s biggest lithium-ion battery factory, producing 32 gigawatt hours (GWh) of battery cells a year by 2023. The $4-billion project was granted a loan from the EU and will be built in cooperation with German industrial giant Siemens. Northvolt is the preferred partner of carmaker BMW after production starts in 2020.

  • Tesla's Gigafactory in Nevada

    Battery cell production: Is Germany coming too late to the party?

    Tesla goes Germany

    US electric car pioneer Tesla, which sources its cells and batteries from its own Gigafactory, has plans to build three more such factories to accompany its first in the Nevada desert (pictured). CEO Elon Musk favors Germany as the location for its European factory. Its Germany-based Grohmann Automation division specializes in manufacturing systems for battery plants, giving Tesla a head start.

  • Picture of CATL chairman Robin Zeng

    Battery cell production: Is Germany coming too late to the party?

    CATL thinking big in Thuringia

    The chairman of Contemporary Amperex Technology (CATL), Robin Zeng, announced plans in July to build its first battery cell production site in the Eastern German state of Thuringia. The factory in Erfurt will have a capacity of 14 GWh by 2022, with carmaker BMW to source €1.5 billion worth of cells from it. China’s biggest battery maker plans to create 600 new jobs there in research and elsewhere.

  • Battery pack-Pack Nissan Leaf (AESC)

    Battery cell production: Is Germany coming too late to the party?

    GSR Capital buys Nissan best-seller

    Chinese investment firm GSR Capital last year bought Nissan Motor’s battery business Automotive Energy Supply Corp (AESC) including battery plants in Japan, the US and Britain. AESC offers cells and modules, and its battery packs (picture) power the world’s best-selling electric car, the Nissan Leaf. Under GSR management, AESC will expand in the UK, hoping to win over more European carmakers.

  • Picture of Samsung SDI President Young-hyun and Hungarian PM Victor Orban

    Battery cell production: Is Germany coming too late to the party?

    Priced Eastern locations

    Countries in Eastern Europe appear to be favored by battery makers. Samsung SDI President Jun Young-hyun (left) and Hungarian PM Victor Orban (center) in May opened a new battery plant in Göd. The Koreans don’t make cells in Hungary, but others will. Japan’s GS Yuasa in Miskolc, China’s SK Innovations in Komarom (launch 2020) and LG Chem in Wroclaw, Poland (launch 2019 with a capacity of 4 Gwh).

  • Worker inspecting battery cell at Daimler's Kamenz plant

    Battery cell production: Is Germany coming too late to the party?

    Carmakers outsourcing

    German carmakers are shunning the risk of producing battery cells of their own, relying primarily on cells made in Asia, which some of them — like Daimler in Kamenz, eastern Germany — assemble to battery packs. The luxury carmaker will source cells for its entire EQ electric car model range, launching in 2020, from SK Innovations and LG Chem.

  • Picture of the entrance of Volkswagen's Salzgitter plant

    Battery cell production: Is Germany coming too late to the party?

    Volkswagen mulls cell production

    Germany’s Volkswagen — the world’s largest carmaker by sales — is still weighing options. One being a cell production of its own at its plant in Salzgitter, Germany. Another alternative to be considered by an electric vehicle strategy meeting of the board on November 16 is an alliance with South Koren cell maker SK Innovation.

  • Bosch logo at a bridge

    Battery cell production: Is Germany coming too late to the party?

    Sober-minded calculations

    Meanwhile, Germany’s biggest automotive supplier, Bosch, dropped plans to produce battery cells, saying the investment required would be too risky. “Given dynamic external market forces that can only be predicted with difficulty, it’s unclear whether this investment would pay off,” the firm said, after calculating it would have to invest €20 billion to secure a market share of 20 percent.

  • Electric car battery produced by a robot

    Battery cell production: Is Germany coming too late to the party?

    TerraE hung out to dry

    German efforts to establish cell production suffered a new setback in October, when TerraE — a consortium of 20 companies — failed. None of the businesses named, including Varta Microbattery Systems, Ford and StreetScooter, eventually stepped foward to fund the project. Launched in 2017, the idea was to build two foundries for 34 Gwh capacity by 2028, rivaling Tesla’s Gigafactory.

  • Picture of Maros Sefcovic

    Battery cell production: Is Germany coming too late to the party?

    Brussels powering ahead

    Fearing the EU auto industry could be left behind in the race, the bloc’s energy commissioner, Maros Sefcovic, has launched a “Battery Alliance,” offering billions of euros to fund cell manufacturing and research. Germany’s newest drive is part of it. Sefcovic believes car making in Europe will be impossible “if you don’t master the skills, the innovation and the research linked to batteries.”

    Author: Uwe Hessler


Fashionably late?

But some analysts think Germany may be too late to the party and that its sudden rush to back electric car battery cell production may even produce a supply glut that would hurt the overall market.

Jens Weinmann, Program Director of the Berlin-based European School of Management and Technology, cautioned ministers against equating the construction of a complex airplane like Airbus with trying to get into the commodity market, where competition is fierce.

“We have had some experience with trying to establish production in Germany,” Weinmann told DW, referring to an attempt to break into the solar cell market. But that strategy “failed miserably.”  Weinmann described how Asian competitors acquired heavily subsidized German startups, leaving red faces within Germany’s much-prized industrial sector.

Another attempt to capture a slice of the EV battery market — which is set to be worth some $84 billion by 2025 — saw Daimler’s subsidiary Li-Tec produce lithium-ion battery cells from a factory in Kamenz, Saxony, but it was forced to close in 2015 due to high operating costs.

Other German conglomerates have flirted with battery cell production and then decided against it, including Bosch — one of the world’s biggest automotive suppliers.

Battery strength will set brands apart

Despite much skepticism, Stefan Bratzel, head of Germany’s Center of Automotive Management, sees domestic control over battery cell production as being vital to protect the uniqueness of the big German car brands.

“With electromobility, the battery cell is one of the most decisive elements, so it’s important to have that competency in Germany, or at least Europe,” he told DW.

Despite its tardiness, Bratzel sees Germany being able to catch up to its Asian rivals in the medium term due to the nascency of the EV market, which accounted for just 1.3 percent of total global new vehicle sales in 2017.

“It’s really a race that Germany has to begin now, and maybe in 9 or 10 years it will be able to compete,” he added.

Having mooted plans for Germany to restart large-scale battery cell production for months, the government is set to back a consortium involving German battery-maker VARTA Microbattery, chemical giant BASF and Ford’s German subsidiary Ford-Werke GmbH, the Reuters news agency reported, citing three people familiar with the deal.

Read more: Made in Germany: Chinese EV battery cells

Development of solid-state technology 

Bratzel noted the consortium’s focus will be on solid-state technology as this kind of battery has a higher energy density, a longer driving range and is safer than the lithium-ion battery, which can be found in most EVs to date.

The auto industry is critical to Germany’s future economic dominance. Amid concerns that the decline of the combustion engine will see the eradication of some 500,000 German jobs, Chancellor Angela Merkel’s government is keen to support the likes of Volkswagen and Daimler to help them maintain their technological edge.

Reports suggest at least one of the proposed manufacturing sites would be based in Germany, with a second potentially in Poland.

The Berlin government’s strategy is part of the European Union’s Battery Alliance initiative, which aims to boost the EU’s share of the electric car battery cell manufacturing capacity, from a derisory 2 percent at present. Altmaier said on Tuesday the aim was for Germany and Europe to achieve a 30 percent market share by 2030.

The German auto industry has, until now, preferred to bulk purchase battery cells from Asia, while focusing on broader issues relating to the transition to EVs, including autonomous driving. But it too sees the strategic importance of domestic battery production.

Read more: German e-cars still hampered by lack of charging stations

In Germany’s strategic interest

“Germany’s car industry has realized it is too dependent on foreign batteries, and in future Asian manufacturers could even prioritize their own car producers especially if they struggle to keep up with demand and as all countries face pressure to meet CO2 (carbon dioxide) emissions targets,” said Bratzel.

The German business daily Handelsblatt said Germany’s new battery cell production consortium would have no direct state participation, apart from the €1 billion in government aid. EU research and development funds could also be utilized, while structural EU funds could be applied for if production involved eastern European countries like Poland.

Other European countries have more advanced plans to produce battery cells domestically. Sweden’s Northvolt aims to produce 32 gigawatt-hours (GWh) of battery cells a year by 2023, while France’s Saft, owned by energy company Total, is planning a new generation of batteries that can be used in EVs.

American electric-car producer Tesla, meanwhile, has built its own gigafactory for EV battery production in Nevada and is also planning similar facilities in China and Europe. CEO Elon Musk says Tesla eventually plans to have some 20 gigafactories around the world, and favors Germany as a location.

Further complicating the German government’s plans are the ambitions of the market-leading Asian battery cell manufacturers, several of whom are now planning European production facilities in joint ventures with local firms.

Each evening at 1830 UTC, DW’s editors send out a selection of the day’s hard news and quality feature journalism. You can sign up to receive it directly here.


Credit: Source link

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