High risk Siemens, Total unit Saft form EU consortium to develop advanced batteries

European firms gear up to challenge Asian dominance of growing market for energy storage.
Made in Europe!

Engineering giant Siemens is banding together with Saft, a unit of French oil company Total and other European firms to develop a new generation of batteries and take on the dominant Asian producers of a key component for everything from electric cars to distributed energy.

The new alliance will present a plan Friday in Brussels, Handelsblatt has learned, to get some of the financial support the European Union has pledged to establish battery production in Europe. Asian producers like Samsung, Panasonic and China’s CATL currently account for 90 percent of the market, consisting mostly of lithium-ion batteries, making the European project a high-risk bet.

“What I expect for battery cell production is that a handful of Asian producers will quickly scale up and cells will become a commodity,” cautioned Henning Wicht, a battery expert at IHS Marketing. Similar to the development in solar modules, that will mean users can get the same quality from any producer, so that it will be difficult to make any money on them.

The European alliance as a result will focus on advanced high-density Li-ion cells and a new generation of solid-state batteries. It will also rely on fully automated production to reduce labor costs. This is the key role that Siemens will play, though participants cautioned that this would not become a new billion-dollar business for the Munich company.

A handful of Asian producers will quickly scale up and cells will become a commodity. Henning Wicht, IHS Marketing

Along with Saft, a specialist producer of batteries, other companies taking part are German machine maker Manz, and Belgian chemical giant Solvay. Manz will build the machines and Solvay will supply the chemicals. The partnership hopes to develop the new batteries and processes for mass production within the next seven years to meet the demand expected for 2025. The group gave no estimate of how they would invest.

The new alliance comes as auto supplier weighs getting into the battery business and Swiss-Swedish ABB partners with Swedish battery startup Northvolt to develop new cell technology and production. The EU is pushing for 10 to 20 battery gigafactories by 2025.

The European Commission convened a meeting in October urging industry participants to form consortiums for battery development and production. Marcos Sefcovic, vice president of the commission, pledged support from the EU budget and urged national governments also to supply aid. The European Investment Bank has already approved a €52-million subsidized loan to Northvolt and is looking at support for German startup TerraE.

In its announcement of the new alliance Thursday, Saft said the group “will need strong regulatory support and appropriate funding from European and national authorities.” According to the Brussels presentation made available to Handelsblatt, the proposal emphasizes strict safety standards and recycling provisions, as well as environmentally friendly production methods. The batteries will be labeled as EU products to distinguish them from Asian batteries.

Not everyone is ready to jump on the battery bandwagon, however. Bosch is taking its time making a decision and CEO Volkmar Denner said last month it could be the biggest investment decision in the firm’s 132-year history. The high risk of the investment, the fierce competition from Asia and the uncertainty of demand for electric cars are all cautionary notes. Other comments from Mr. Denner suggest Bosch is leaning against entry into the business.

For its part, BMW, which plans to have a dozen all-electric models on the road by 2025, only wants the producers to be nearby, and Samsung and CATL are obliging by building up their production facilities in Europe. As long as there is competition among the Asian producers, BMW says, it sees no need for a European solution.

In the meantime, Poland is wooing South Korea’s LG group to produce batteries in that country and Slovakia is seeking investment from Eocell, a Silicon Valley group with Chinese links.

Several Handelsblatt reporters contributed to this article. Handelsblatt Global editor Darrell Delamaide adapted it into English. To contact the author: [email protected].