E-MOBILITY Battery cell production to receive state investment

A lack of battery production is a serious weakness in Europe's transition to e-mobility. Now both Brussels and Berlin are promising to help finance large-scale production.

It may be the first step on the road to large-scale battery cell production in Europe. The European Investment Bank (EIB) has approved €50 billion ($61.5 billion) in financing for Swedish startup Northvolt, intended to help the firm build a demonstration line for its planned cell manufacturing facility in the north of Sweden. Northvolt CEO Peter Carlsson, a former manager at Tesla, wants to increase production to levels comparable with the US manufacturer’s planned “gigafactory” by 2023.

The European Union and Germany’s federal economy ministry want several factories on this scale to be built in the near future. More than 10 gigafactories 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. Matthias Machnig, Germany’s secretary of state for the economy, also thinks action is needed: “Batteries are the new motor and battery cell production is one of the key questions for Europe’s future as a place to do business,” he told Handelsblatt.

In mid-October, Mr. Šefčovič brought together a round-table of politicians and industry representatives in hopes of jump-starting European battery production. The proposals put forward by this battery alliance will be discussed at the EU Industry Day in Brussels on February 23. The Commission wants to present an action plan by early May, indicating which steps should be financed with EU money.

Batteries are the new motor and battery cell production is a key question for Europe's future as a place to do business. Matthias Machnig, German secretary of state for the economy

Mr. Šefčovič has promised greater resources from EU research funding for the budgetary  period starting 2021. EU and national funding should be combined, he has suggested, and should also be exempt from the usual audits on state aid to industry. The German battery manufacturing startup Terra E is seen as one possible candidate for EU funding.

But Asian suppliers also rate their chances of receiving support. Several cell producers from South Korea and China, and the United States, have registered their interest in building production facilities in Europe, say sources in Brussels. This does not necessarily indicate a belief in a surefire boom in European demand: instead, the firms may want to expand their global production with the help of European subsidies.

Lack of certainty regarding future demand for electric cars has so far deterred European carmakers and suppliers from major investments in battery cell production. Reluctant to risk of investing billions in their own production facilities, for the moment they prefer to source batteries from suppliers, including Samsung, LG and CATL. Nearly 90 percent of battery cells worldwide currently come from China, Japan and South Korea.

Mr. Machnig regards this wait-and-see approach as a serious error: it would be “blind in terms of competitiveness and industrial policy” to think a key electric car component can be bought in like a mass-produced item. The high investment costs involved mean that companies must form consortia, said the minister, from the center-left Social Democratic Party. Decisions on manufacturers’ battery production capacity must be taken before they launched numerous electric models on the market in 2020, he added.

The SPD also wants to do more to accelerate Germany’s transition to low-emission electric motors. In negotiations on a new coalition deal, the SPD and Angela Merkel’s center-right Christian Democrats agreed an increase in public subsidies for buyers of electric taxis and light goods vehicles. The SPD originally proposed a general subsidy of €8000 per electric car. Currently, vehicles with 100 percent electric motors receive a subsidy of €4000, with half of this funding coming from the German government and half from the car industry.

Greater use of low-emission vehicles would help reduce the high levels of air pollution in many German cities. The federal government is currently attempting to avert a likely lawsuit by the European Commission because of high levels of nitrogen oxides. On Sunday evening, it again wrote to the Commission outlining its plans to improve urban air quality. The Commission has announced that it will decide next month whether it will take Germany to the European Court of Justice on the issue.

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. To contact the authors: [email protected], [email protected], [email protected]