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European Union fights back against Chinese electric car battery dominance
Chinese dominance of the electric car battery market and so-called gigafactories have disincentivized many European manufacturers, EU subsidies aims to alleviate this problem
Michael Marray 26 Sep 2018

The European Union is making progress with plans for electric car battery manufacturing to compete with Chinese imports - with the help of state aid during the startup phase.

A leading role is being taken by Germany. On 18 September, Federal Minister for Economic Affairs and Energy, Peter Altmaier, met with EU Energy Commissioner, Maros Sefcovic, in Brussels, and battery production was high on the agenda.

"Europe has a vital interest in its own battery cell production," Altmaier said at a press conference after the meeting. "We are all committed to the social market economy, and believe that markets can solve problems much better than politicians, but from time to time it is important to provide some initial support, in order to make it possible for European companies to compete with companies from outside Europe."

"I believe that Europe will be able to have a competitive battery cell industry in a number of years, that can survive and that can compete even without long-term state subsidies - that is our aim," Altmaier added.

However, in the short term state subsidies will be required. One year ago, the EU Battery Alliance was initiated, and the current German coalition government has decided to play a key role in this alliance, within the framework of Germany's overall industrial strategy.

Progress is being made on bringing together companies interested in participating in a battery consortium, with manufacturing facilities in Germany and elsewhere in the EU. Talks are already underway in Brussels on how competition rules and state aid rules will be applied.

Analysts say that the European Commission has clearly signaled its support for new manufacturing facilities, as long as at least two EU countries are involved. This support includes an initial green light from Competition Commissioner Margrethe Vestager, subject to seeing the final plan.

At present, China and South Korea dominate the global electric car battery market, leading to concerns about overdependence on Asian suppliers.

In a speech at the Intersolar and Electrical Energy Storage Europe 2018 event in Munich in June, Sefcovic said that there was one critical and strategic component in Europe's e-mobility value chain which was still weak - namely batteries. "If we do not want to give away this strategically important sector we must manufacture batteries here in Europe," he told the audience.

The sense of urgency has increased as a result of plans by Contemporary Amperex Technology Ltd (CATL), the biggest lithium car battery manufacturer in China, to build a Euro1 billion factory in Germany.

This followed the signing of a multi-billion Euro contract to supply batteries to BMW. The plans for this factory have been viewed as controversial in Brussels but, after signing the contract with CATL, BMW chief executive officer, Harald Krueger, said that although talk of a European battery alliance was encouraging, this would be meaningful only if it was competitive. In the meantime, he must plan ahead with battery making partners that are already in the position to sign supply contracts.

BMW will use so-called fifth generation batteries for its iNext electric powered car, which is set to come onto the market in 2021.

CATL will begin construction of its factory, near Erfurt in Thuringen, next year. Production start is slated for 2022, with most of the batteries initially being supplied to the BMW plant in Dingolfing, Bavaria. CATL was founded in 2001, and is headquartered in Ningde, Fujian Province. In June the company made an Initial Public Offering on the ChiNext board at the Shenzhen Stock Exchange.

Also, in June, another Chinese battery maker, BYD, opened its new factory in Qinghai province, which can produce 24 gigawatt-hours of batteries a year. It intends to increase the company's overall production capacity to 60 GWh by 2020.

BYD's existing factories are in Shenzhen and Huizhou. In April BYD signed an agreement with the government of the Chinese city of Chongqing to construct a battery factory with an annual capacity of 20 GWh. In addition to batteries, BYD manufacturers electric buses and trucks.

The construction of more and more so-called gigafactories in China has disincentivized many European manufacturers from establishing startups in this industry segment. German or EU subsidies will help alleviate this problem.

The European Commission has been working on both an EU Battery Alliance and an EU Action Plan on green batteries. Under the Action Plan, the EU is taking a proactive approach to critical raw materials to boost its strategic independence. It is mapping and exploring EU resources (significant unexplored potential in 13 EU countries), facilitating access to secondary raw materials through recycling in a circular economy of batteries, and setting up free trade agreements securing fair and sustainable access to raw materials from resource rich countries outside the EU. There is also EU money available for research projects.

Ahead of the Informal EU Leaders' meeting on innovation in Sofia, Bulgaria, in May, the European Commission published a document, titled "A renewed European Agenda for Research and Innovation - Europe's chance to shape its future".

The document said that Europe is experiencing an innovation deficit in some areas. This is not down to a lack of ideas or initial startups - the problem is rather a lack of scale-up and diffusion, with innovations not always being translated into new market and growth opportunities. And industry investment in research and innovation has to step up. The Commission concluded that the EU is being outpaced by China and the United States in levels of investments in the technologies that are set to dominate in the future.

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