Power Less Germany's Flat Battery Business

Germany was once a leading maker of batteries but it has fallen far behind in both technology and production. The market is growing and companies are seeking to enter the fray.
For batteries, the race is on.

Germany was once a leading maker of batteries.

In 1888, rechargeable batteries made by Büsche & Müller powered the first electric car.

Five years later, the Norwegian explorer Fridtjof Nansen crossed the Arctic Ocean fuelled by Varta batteries.

After World War One Germany dominated the production of small storage batteries, supplying 80 percent of global production.

Those days are long gone.

The recent announcement by Elon Musk and Tesla that the company will manufacture batteries capable of powering an entire house shows the future potential of this market.

While it remains unclear what technology will triumph in the end, Mr. Musk, an American trailblazer who has already scared the automobile industry with his sleek electric cars, has now sparked the race for a super-storage battery.

Germany stands by watching.

Just how badly Germany lags can be seen in the market for electric car battery cells. The last manufacturer of electric car batteries, Kamenz-based Li-Tec, a subsidiary of Daimler, is discontinuing production after its partner, Evonik, pulled out.

“Soon, there won’t be a producer anymore in Germany delivering battery cells for electric cars,” said Wolfgang Bernhart, a battery expert at the consulting firm Roland Berger.

 

The Global Market for Lithium Ion Batteries-01

The worldwide market for lithium-ion batteries is already $30 billion, or €26.8 billion, and is expected to reach $70 billion by 2020, according to experts from Frost & Sullivan, the global research and analysis firm.

Batteries for consumer electronics currently account for 60 percent of the market with about 18 percent for electric car cells and less than seven percent for energy storage.

Experts expect those figures to change radically by 2020 and predict the electric car sector will account for 30 percent of the market, while grid and storage products will account for almost 38 percent. This is precisely the field Mr. Musk has consistently staked out.

Germany, in contrast, has missed the boat and fallen behind in battery technology. “The market will be dominated by Asians,” Mr. Bernhart said.

While Panasonic, LG, Samsung and now Tesla have taken control of the industry, he said, Germany scarcely plays a role, even though German manufacturers once monopolized these cutting-edge fields. It was inventors at Sonnenschein who in 1957 developed a battery using a gel as a liquid electrolyte, making the “Dryfit” rechargeable battery maintenance-free. In 1969, German batteries made Neil Armstrong’s landing on the moon possible. Now, next to nothing remains.

Sonnenschein, a family-owned business once managed by former German minister Christian Schwarz-Schilling, took on too much debt with construction of a new factory in Upper Palatinate and was sold in 1991.

Rival Varta was hit even harder. Once the industry leader as part of the Quandt empire, it was broken up in 2002 with the car battery business acquired by U.S.-based Johnson Controls while the household battery segment was purchased by the America company Rayovac. The microbattery division, which includes lithium-ion batteries critical to the future, went to the private equity and venture capital firm Global Equity Partners.

There have been considerably more lows than highs in the battery business in Germany recently.

 

The Worlds Biggest Battery Cell Makers

 

A promising joint venture founded in 2013 by Continental, Europe’s second-largest automotive supplier, with Korea-based SK Innovation closed in fall 2014. At the time of the shutdown, Continental CEO Elmar Degenhart said the “economic foundation” for the production of lithium-ion batteries was lacking.

A few months ago, Daimler decided to shutter Li-Tec, the cell producer owned by the corporation, even though it was producing excellent technology. Insiders reported that low production numbers made material procurement much more expensive than it was for Japanese and Korean competitors.

Joint production of cells by Samsung and Bosch ended because of strategic differences, though since 2014 Bosch has embarked on a new joint venture that includes Japanese producers Mitsubishi and GS Yuasa. Whether the effort will pay off is anyone’s guess.

As the sector grows, the increasing number of companies looking to cash in creates complications. “The market for lithium-ion batteries is driven by an immense overcapacity at the moment,” said Rüdiger Eichel from the Jülich research center, which predicts prices will drop enormously in the near future.

The industry faces a conundrum. Production must be strong enough to make high performance batteries for use in electric cars less expensive, but so far, the market for those kinds of autos remains quite small, making economies of scale hard to reach.

Nonetheless, Tesla is betting big that lower prices in the future will fuel demand and grow the market for batteries. The company is building a new Gigafactory in Nevada capable of producing 500,000 electric car batteries per year.

There is still some hope for the Germans.

BASF has designated battery technology as one of its ten priority research fields. “We are working all-out on battery chemicals,” said CEO Kurt Bock at the annual shareholder’s meeting last month.

BASF doesn’t plan to sell complete batteries, but intends to become a leading supplier. The company recently created a joint venture with the Japanese electro-chemical specialists Toda Kogyo, which has a battery chemical production capacity of more than 18,000 tons.

And the future could hold pleasant surprises for Germany.

“The Asians have a lead in present-day technology,” said Reimund Neugebauer, president of the Fraunhofer Society, Europe's largest research organization. “If another technology becomes the standard, they will be no better off than we are.” An alliance between Volkswagen, Siemens and Fraunhofer, for example, could develop a battery technology at any time in Germany, he told Handelsblatt, adding, “A factory could be built within one to two years.”

 

Siegfried Hofmann is Handelsblatt's chemical and pharmaceutical industries correspondent. Axel Höpner is head of Handelsblatt's Munich bureau. To contact the authors: [email protected], [email protected]