Germany's bid for China by building electric car batteries

The German government is betting that batteries are the key to the country's industrial future. The automotive industry is vital to the German economy and cars are switching to electricity. So it is thought that Europe – and Germany in particular – should produce more batteries of electric cars.

It is certainly a booming industry; Sales of electric car batteries are expected to reach $ 60 billion by 2030. But the companies that manufacture these batteries are mainly Asian. Most are Chinese companies such as the contemporary Amperex Technology Co. Limited (CATL) and Build Your Dreams (BYD) companies, whose growth has been boosted by public subsidies granted to Chinese electric car manufacturers and which will hold probably 70% of the market in a few years. time. There are also major Japanese and South Korean players such as Panasonic (Tesla and Toyota's partner,), LG Chem and Samsung SDI.

Germany wants some of this action. Last November, the government announced the creation of a billion-euro fund (1 billion euros) for German companies for the development and construction of battery cells. . Germany's "National Industrial Strategy 2030", unveiled in February, feared that "if the digital platform for autonomous driving with artificial intelligence came from the United States and the battery of Asia for the cars of the future, Germany and Europe would lose more than 50% value-added in this area. "The solution? State aid for the production of battery cells.

But not everyone is convinced that this approach makes sense, it is the least that one can say. "It's taxpayers' money that burns," said Ferdinand Dudenhöffer, professor of automotive economics at the University of Duisberg-Essen and veteran of automakers like Opel and Porsche. "It's stupid, it's crazy, what our Ministry of the economy does."

According to Dudenhöffer, the government is looking for value in the wrong place, because the money is actually in the main components of the battery: cathodes and anodes. "The production value of the cell is about 15%. Sixty percent is only for cathode materials and 20% is for anode materials, "he said. "The value does not exist in the manufacturing process in which they want to spend 1 billion euros. The value is in the materials. "

Challenges of catching up

BASF in Germany, one of the largest chemical companies in the world, is focusing on battery materials – he is building a cathodic materials factory in Finland, in cooperation with Russian miner Nornickel. But, said a spokesman for the company, BASF also believes that it is "crucial to invest on a larger scale in cell production in European countries and thus ensure a reliable supply of battery materials and optimal competitiveness, so that Europe is not solely dependent on imported cell supplies. " . "

And many German companies, including automakers such as Volkswagen, may have taken into account the statement of Toyota's executive vice president, Shigeki Terashi, that "whoever conquers the batteries will conquer the world." electrification of cars – is seriously considering making batteries itself.

The biggest problem in trying to catch up with Asian battery manufacturers is that it takes a lot of investment to get into the manufacturing process, but once you have started, replicating this process is relatively inexpensive.

As noted by Dudenhöffer, CATL, the world's largest manufacturer of electric vehicle batteries, with three factories in the world, is building a "gigafactory" factory in the German city of Erfurt for an amount of about 240 million euros. When the German engineering giant Bosch was planning to build a battery factory a few years ago, its cost was estimated at 20 billion euros. Bosch abandoned these plans last year, claiming that the size of the investment made this plan too risky.

Xiaoxi He, a senior energy storage analyst at IDTechEx, an emerging technology research company, agreed that "it does not really make sense financially" for German automakers and automakers. other companies trying to produce electric car batteries in Germany, at least in the short term. However, she added, many variables could change the business case – for example, size and financial strength, as well as relations with Asian battery manufacturers.

A European "counterweight"

The deadline for businesses to express their interest in the German government's billion-euro battery pot was set for mid-March and applicants have until Easter to make their proposals concrete. in complete applications. In total, about thirty projects have been proposed, with potential candidates including car manufacturers to the manufacturers of parts, materials and chemicals.

Candidates must be based in Germany, but the state aid initiative ultimately aims to be European in nature and involves coordination with other countries of the world. EU that also offer liquidity to their businesses.

The details of the candidates remain confidential while the award process is ongoing, but some have made their own announcements. Among the car manufacturers concerned, Volkswagen, which wants to finance both R & D and "industrial implementation", and BMW, which will direct the funds towards research and development: it is already the first customer batteries from the CATL factory in Erfurt. .

VW is currently using a variety of Asian battery providers for its huge boost of electric cars, but CEO Herbert Diess said last month that the company "is also closely studying the possibility of a stake in manufacturing facilities. battery cells in Europe ". Daimler already manufactures batteries in Germany and also builds a battery factory in Poland.

Inside a Volkswagen factory in Wolfsburg, Germany. (Photo of Julian Stratenschulte / Photo Alliance via Getty Images)

According to the German Ministry of the Economy, it is really important to help European companies to "counterbalance" the established Asian suppliers.

"The electricity storage units will be used in many different applications in the future (bicycles, cars, even airplanes) and the demand for batteries will increase in parallel with the production capacities. This will involve a large number of jobs, value chains and expertise for the future, said a ministry spokesman. "In Germany and Europe, we therefore need competitive, innovative and environmentally friendly battery cell manufacturing capabilities."

"Many interested companies have requested funding in response to the invitation from the Ministry," said the spokesman. "The amount available is oversubscribed several times, which suggests that the sector is extremely interested in the future."

Technology of the future

For some companies looking for government funding, "going forward" means going beyond the current technology of liquid lithium-ion batteries for development that could be in a few years: electric car batteries to semi -conducteurs.

The industry hopes that solid-state batteries will provide greater energy density, and therefore greater capacity and greater autonomy. They should also recharge faster than liquid lithium-ion batteries and be less likely to catch fire.

"We believe that liquid lithium-ion technology does not have the potential to fully meet the demands of the market for range, weight and cost. So we think we need to jump to another technology that could be in a solid state. "A spokesman for the German auto parts supplier Continental, who wants to use some of this money from the government to finance the R & D." It is too late to enter the liquid lithium-ion market. The investment would be too high and we do not see the future potential. "

Continental says it will decide next year whether to continue producing solid-state batteries. However, even if the economic model looks attractive enough, it would take until at the latest until 2025 to boost its capabilities and get into mass production – and even then, said the spokesman of the company. As a business, facility cost considerations mean that Eastern European countries are "of course more promising" than Germany.

As for Professor Dudenhöffer, it will take a decade or more for semiconductor batteries to become an industrial reality. "In the next five years, no one is seriously expecting a breakthrough technology that will make liquids obsolete," he said. BASF also said that it expects that "lithium-ion batteries will remain the predominant technology in electric vehicles in the near future".

Dudenhöffer suggested that European companies forget about production and focus on finding materials to overcome problems, such as the tendency of cold weather to empty batteries faster.

"From my point of view, BMW [has the best approach] because they just want to understand the chemistry of the cell, "said Dudenhöffer. "They want to know what is the best cell, what is the best performance, and go to their provider and say," I want to have this cell, what is the price? "