Chinese battery cell manufacturer CATL dipped a toe into the European battery manufacturing market earlier this year when it decided to invest €240 million in a battery factory located in Erfurt, Germany. In a new filing with the Shenzhen stock exchange, the company says it will increase its investment in battery production and research in Europe to a total of €1.8 billion, according to a report by Electrive.
In February, Matthias Zentgraf, the head of CATL’s European operations, told Electrive that the original plan to produce 14 GWh per year of batteries would be just a drop in the proverbial bucket. “With realistic planning, we assume — calculated at a low level — a demand of 100 GWh in 2025,” Zentgraf said. That would rival the output of Tesla’s Gigafactory 1 in Nevada.
The company says its new investment strategy has come about after its board of directors reassessed the development of its overseas battery business in light of changes in demand taking place in Europe. “Behind CATL’s move is a surge in Europe’s EV industry, as many renowned German brands like BMW and Volkswagen are shifting their strategies from traditional internal combustion cars to EVs,” Feng Shiming, managing director of Menutor Consulting Shanghai, told the Global Times. “A division of labor with China’s advantage in batteries and Germany’s advantage in car production is the best choice for German companies.”
The company expects the batteries produced at the new factory in Erfurt will supply customers such as VW, BMW, Daimler, PSA, Volvo, and Jaguar Land Rover. German authorities worry that Asian battery companies will dominate the market for EV batteries in Europe and would like to see German auto manufacturers invest in battery production. Federal Minister for Economic Affairs and Energy Peter Altmaier says he would like companies in Germany and the rest of Europe to supply about 30% of worldwide demand for battery cells by 2030.
But so far only Volkswagen has moved in that direction. It plans to build a battery factory in Salzgitter together with Northvolt that will eventually be capable of producing 24 GWh of batteries a year. Northvolt is also building a battery factory of its own. But the other German manufacturers have shown little appetite for making their own batteries. Many are concerned that new battery technologies will be available soon that may render existing factories obsolete.
That is certainly a risk, but one that Tesla and many Asian companies are willing to assume. As the EV revolution expands, there will be tumultuous changes in the auto industry. Some companies will emerge stronger and some may fail to thrive. Standing on the sidelines watching as those changes occur may not be the best long-term strategy.