Batteries: what if Europe was catching up?

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The two years 2020 and 2021 have been the years of the real take-off of the battery electric vehicle (BEV) mass market. Although announced years ago, this transformation continues to reveal, month after month, the fragility of the certainties and forecasts that some of us have made. This is the case, we can hope this autumn, of the Asian ultra-domination in the field of batteries and its political corollary, which was the inability of the EU to show itself to be equal to what the Chinese state is undertaking to manage this transition in terms of industrial policy. The two 'battery Airbuses' that have finally taken off are not ULMs but solid hitches that make it possible to see this transformation of the automotive industry as likely to be negotiated without the loss of sovereignty emerging as inevitable.

In terms of electric vehicles, the strategic and political stakes are such that all analysis and information must be decoded, since the speaker intends both to point out the facts and to convince us that we must follow him in the consequences he draws from them. Thus, Europe's lag vis-à-vis Japanese, Korean or Chinese battery producers is undeniable, but one can conclude that it is absolutely necessary to avoid committing the European automobile industry to a path that would vassalise it technologically and/or that it is urgent to tackle the issue so that this Asian ultra-domination will be nothing but a memory tomorrow.
 
Insofar as the mass-produced battery electric vehicle is only just taking off at the beginning of the decade, production capacities have yet to be built and the skills to effectively manage the famous "gigafactories" are also being structured. Similarly, on the technological front, the chemistry of future batteries is very uncertain and there is no guarantee that incumbents such as CATL, LG, SK, Panasonic or BYD will be able to master it better than new comers such as ACC, Northvolt or Verkor.
 
During the FEAL (Forum on European Automotive Industry in Lille) organised by Aria des Hauts de France on Wednesday and Thursday, Yann Vincent, President of ACC, came to present the state of the dossier as it stands today in Europe and beyond. He spoke 24 hours before the announcement that Daimler had joined the very Franco-French team that ACC still constituted, and he allowed the audience to be convinced that, in a dossier where everything remains to be done, even a significant delay is likely to be made up for quickly.
 
In fact, as he reminded the audience, the existing battery production capacities in Europe are very small: the only existing 'gigafactories' are basically those of LG in Wroclaw, Poland (15 GWh), Samsung in Hungary (10 GWh) and Envision (AESC) in Sunderland (2.5 GWh). The rest is just projects.
They can now be counted by the dozens, since according to figures published in December by the European Commission, the demand for GWh should, for Europe alone, be multiplied by 12 and increase from 36 to 443 GWh.
Yann Vincent gives a figure of 1.4 million BEVs registered in Europe in 2020, associated with a demand for batteries of around 60 GWh, half of which had to be imported. In 2030, Europe alone will produce at least 9 million BEVs and would then need at least 650 GWh (at least 1 TWh in 2035). For Europe, this means that the existing capacities today (30 GWh) do not represent 5% of the needs to be covered. If building production capacity of 1 GWh involves 60 million euros of investment, then it will be necessary to invest between 30 and 50 billion euros over the next 15 years to build this capacity. "You have to, says Y. Vincent, multiply these sums by two if we want to integrate the upstream part (chemistry, materials, mines, etc.). It is in this race that States, regions, manufacturers and battery manufacturers are engaged today.
 

Insofar as the strategic nature of these investments is identified by both politicians and industrialists, coalitions are being formed and, from this point of view, the two "Important Project of Common European Interest" (PIIEC) that are emerging seem to be up to the challenge. Manufacturers cannot face the scale of the investment effort alone. They must join forces and, faced with the capacities of major world competitors (Chinese in particular) to benefit from privileged access to the financing of the said investments, they must also be able to benefit from privileged financing circuits or even public aid. The PIIECs acknowledge this need and, even if there was some concern about the slowness with which these mechanisms were activated, the result today is two convincing projects.

 
The largest so far was the Northvolt project which aims to build over 150 GWh of capacity by the end of the decade to supply mainly VW, BMW and Volvo (35% of European registrations).
By being joined by Mercedes, as Y. Vincent, ACC has been confirmed in its strategic and technological options and, above all, will be able to change dimension: the capacities targeted were previously 48 GWh by 2030. ACC is now aiming for 120 GWh and will therefore be able to meet the demand associated with the production of 1.6 million vehicles with an average battery capacity of 75 kWh. In this configuration, where Stellantis and Mercedes will be the preferred customers, ACC represents 28% of the European automotive market. The European battery industry, which was so feared not to emerge, is well on the way to being structured.
 
The game is complicated for all these players because in Europe, as elsewhere in the world, they need - and will continue to need in the future - to continue to buy batteries from the big global players who are also expanding their capacities in Europe: LG is to increase its capacity from 15 to 65 GWh, CATL is building 100 GWh capacity in Erfurt for Mercedes, among others... Renault has chosen not to join either ACC or Northvolt for the time being, but will continue (like Stellantis) to work with LG, will call on the former subsidiary of Nissan and NEC (AESC), bought by the Chinese Envision, both in Sunderland and in Douai, and will nevertheless play the European card by backing part of its battery research with Verkor, with the support of the French state. No one is denying themselves access to Asian partners, but everyone is trying to play their own game in parallel.
 
27/09/2021 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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