Europe leans on Asia for ‘native’ EV batteries – carandbike | CarTailz

Europe’s bid to build a domestic battery industry for electric vehicles has encountered obstacles as investors are reluctant to provide start-ups with enough funding to challenge the Asian companies that dominate the market.

With the notable exception of Sweden’s Northvolt, some startups hoping to build so-called gigafactories to compete with the Asian giants are betting on smaller facilities with the goal of attracting more investment later.

Britishvolt is just one of the startups with big ambitions to get into trouble. It wants £3.8 billion ($4.4 billion) to build a gigafactory in northern England, but its plans are hanging in the balance as it struggles to attract enough investment.

Unlike Northvolt, which formed a joint venture with German carmaker Volkswagen in 2019 and secured a long-term supply deal with BMW in 2020, Britishvolt has yet to win major customers or test its technology on a commercial scale.

“No one will give you an order based on a PowerPoint,” said David Roberts, who has invested in several UK companies to focus on zero-emission cars. “You’re looking at six years before you have real sales, so where the heck are you getting $5 billion plus ops with no contract?”

For this reason, some European startups are taking the slower route, building smaller, cheaper sub-1 gigawatt-hour (GWh) plants — so-called “mega-factories” — to mass-produce cells and then win orders from automakers.

French battery startup Verkor, for example, announced on Wednesday that it had raised 250 million euros ($249 million) to fund a mega-factory.

CEO Benoit Lemaignan described it as a “small step” before the company begins raising funds for a €1.6 billion, 16GWh gigafactory that will open in 2025 and supply French carmaker Renault.

ASIAN MARKET SHARE

The European Union, which launched the European Battery Alliance in 2017 to boost a domestic industry, wants companies in the region to supply 90% of the batteries needed by 2030 to power the continent’s energy transition.

When it comes to electric vehicle (EV) batteries, Benchmark Mineral Intelligence (BMI) estimates that Europe should have a production capacity of 1,200 GWh by 2031 if current plans come to fruition, which will exceed expected demand of 875 GWh.

But of that 1,200 GWh, 44% will be provided by Asian companies with factories in Europe, ahead of domestic firms at 43% and Tesla at 13%, according to a Reuters calculation based on BMI data.

In addition, Caspar Rawles, BMI’s chief data officer, said some of the plants being planned by European companies “will never come off the drawing board”.

At the same time, the Chinese, South Korean and Japanese firms that dominate the market are more likely to follow because they already have deals with global automakers and have experience building gigafactories around the world, he said.

“The vast majority of European capacity will be Asian,” Rawles said.

European automakers BMW, Mercedes-Benz, Stellantis and Volkswagen have all signed offtake agreements for plants under construction by Asian players including China’s CATL and South Korea’s LG Energy Solution.

And China’s Envision AESC, for example, is already thinking about building more plants in Europe.

The European Battery Alliance (EBA) recognizes that Asian companies, and in particular Chinese companies, are likely to increase their market share in the coming years, supported by their track record and off-take agreements.

“A LONG AND CURVED ROAD”

“The European Commission and Member States should be aware that if we are to have at least some level of resilience, knowledge and expertise in battery production, you need domestic supply,” said EBA Policy Manager Ilka von Dalwigk .

“Even if we have production in Europe, that doesn’t mean we have the know-how or control,” she said. “Right now we’re looking at Northvolt – but as for the other initiatives, there’s still a long and winding road ahead.”

Alongside Northvolt, which shipped its first lithium-ion batteries from its Swedish gigafactory this year, another local company is Automotive Cells Company (ACC), a joint venture between French energy giant TotalEnergies, Stellantis and Mercedes-Benz.

ACC is targeting 120 GWh capacity by 2030, which will require 7 billion euros in equity, debt and subsidies, but its first gigafactory in northern France is still under construction.

Italvolt is aiming to build a 3.5 billion euro gigafactory in northern Italy. It hasn’t announced any fundraising plans yet, but told Reuters a joint venture would get the plant off the ground and promised more details soon.

Other startups taking the slower route to gigafactories include Slovakian company InoBat.

The company will open a 45-megawatt-hour (MWh) pilot line in Bratislava early next year to manufacture high-capacity batteries for customers to test and has signed agreements, including with German air-taxi developer Lilium, worth €500 million through 2030, Chief Executive said Marian Bocek.

He said InoBat has a pipeline of potential deals worth €25 billion and aims to build production capacity in 4GWh increments from 2025 – costing up to €400m each – once the deals are signed.

“You don’t have to raise billions of dollars, you’re basically raising money for the acceptances that you sign on the backs of bankable customers,” Bocek said.

German startup Theion develops lithium-sulfur batteries and Chief Executive Ulrich Ehmes said the startup is aiming to raise €50 million for a small facility to build samples for car and aerospace companies – and then funds for a first gigafactory with up to 20 GWh.

“IT’S A BIG QUESTION”

Another start-up that has its sights set on a gigafactory is the British company Ilika, which produces small solid-state batteries for “electroceuticals” or medical implants for the US market in a small plant in Romsey, southern England.

Chief Executive Graeme Purdy said Ilika will seek a joint venture with a US manufacturer to mass-produce the small cells and take the same approach for its Goliath EV battery project.

The startup will build a mega-factory, likely in partnership with an automaker, then seek a joint venture or license the technology to a battery maker to manufacture in a gigafactory, rather than trying to raise billions itself.

“That’s a big request,” Purdy said. “Rather than trying to reinvent wheels on our way there, we’d rather work with an organization that has already done so.”

British sodium-ion battery startup Farradion, meanwhile, took a different tack, selling itself to Indian conglomerate Reliance Industries last year for an enterprise value of £100m. Reliance is aiming to build a 50GWh facility in India.

“When you have new chemistry like this, you need a champion behind it,” said James Quinn, Farradion’s chief executive.

The EU has approved €6.1 billion in member state funding for battery research and innovation since 2019, while the UK has a £1 billion fund to support investment in electric vehicle supply chains. Some are looking for more help from politicians.

InoBat’s Bocek said he is campaigning in Brussels to favor EV batteries developed and engineered by European firms – using local raw materials wherever possible – similar to the United States’ approach to phasing out domestic production with theirs Promote Inflation Reduction Act.

“We can’t compete with the Chinese on costs,” Bocek said. “But we can compete when it comes to a localized value chain.”

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