Europe may face challenges in the battery manufacturing industry, potentially turning into just an assembly center for Chinese battery producers, unless new regulations are enacted to ensure technology and knowledge are transferred along with state funding. This concern stems from a study by the environmental group Transport & Environment, which emphasizes that current collaborations between Chinese battery manufacturers and European carmakers primarily focus on short-term battery supply rather than fostering valuable skills and knowledge.
Julia Poliscanova, a senior director at Transport & Environment, pointed out the risks of relying only on companies like Northvolt, suggesting that Europe can either continue to struggle for the next decade or more or proactively learn from countries like China, which has rapidly advanced in technology over the last two decades.
As Europe works to lessen its dependency on China by developing local supply chains for green technologies, recent setbacks like the collapse of Northvolt, viewed as a major player in the battery sector, highlight urgent needs for change.
In a response to current demands for electric vehicles (EVs), more European automakers are joining forces with Chinese battery firms to secure a stable supply of batteries. An example is Stellantis’s announcement to build a €4.1 billion lithium battery factory in Spain in collaboration with CATL, China’s largest battery manufacturer. While the Spanish government has offered around €300 million in aid, no stipulations for technology transfer were set.
Volkswagen is also working with Gotion High-tech for its battery facility in Salzgitter, becoming Gotion’s top shareholder after a €1.1 billion investment in 2020. However, the study points out there is minimal knowledge exchange between the two firms.
Volkswagen refuted this, claiming there is a significant knowledge transfer, including shared intellectual property and staff exchanges. Poliscanova stressed the need for European requirements to enhance learning and avoid becoming merely an assembly line.
Currently, over 90% of EV and storage batteries are produced by companies from South Korea and China, with a significant portion of battery factories owned by these Asian firms. In contrast, American automakers have teamed up with South Korean companies, such as Ford with SK and General Motors with Samsung SDI, while ensuring that skill transfer and control are part of their agreements with Chinese manufacturers.
To adapt to this competitive landscape, Brussels is exploring options to compel Chinese businesses to transfer intellectual property to European companies in exchange for EU subsidies, although these new requirements are expected to be less stringent than those in China or the U.S.
This warning arrives just as European firms are striving to keep pace with their Asian counterparts amid a slowdown in EV market demand and tightening funding. Yann Vincent, the CEO of Automotive Cells Company, a venture supported by French automakers, revealed that plans for expanding manufacturing operations in Germany and Italy have been put on hold due to a decline in EV demand. A €4 billion financing plan for this expansion has also vanished.
To navigate these financial challenges, ACC is looking into producing an affordable battery using lithium-iron-phosphate technology, a less expensive option but one that offers lower energy density. However, Vincent expressed uncertainty over whether this plan could be realized.
With Asian companies lighting the path in the battery manufacturing sector, European firms are finding themselves at a major crossroads and must prioritize technology and skills to not miss out on future opportunities.