Asian Battery Makers Seize Expansion Opportunity in Europe, U.S.

No. 1 producer CATL opens a plant in Germany, while LG Energy Solution expands in Poland and builds a factory with GM in Ohio.

Asian Battery Makers Seize Expansion Opportunity in Europe, U.S. - Energy News Beat

In the Middle Ages, the city of Erfurt in central Germany was a key stop on a trading route linking the far-flung ends of Europe. It’s about to take on a crucial new role as home to one of the world’s largest battery makers.

China-based Contemporary Amperex Technology Co. Ltd., the top global supplier of lithium-ion batteries for cars, storage systems, and power grids, will begin production at a factory outside Erfurt, later in 2021. It’s the first foreign plant for billionaire Zeng Yuqun’s decade-old business.

CATL’s plant represents a key point in the auto industry’s shift to electric. Spurred by growing demand, Asia’s dominant battery producers are expanding directly into Europe and the U.S.

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CATL’s German factory is under construction outside Erfurt.
PHOTOGRAPHER: MARTIN SCHUTT/DPA/ZUMA PRESS

Electric vehicle sales in Europe in 2020 exceeded those in China for the first time, according to BloombergNEF forecasts, and Europe’s share of global battery manufacturing will rise to 17% by 2025, up from 6% in 2020. In the U.S., Joe Biden’s presidency has raised expectations for faster EV adoption: BNEF forecasts a 30% increase in sales in the first half of 2021, compared with the same period in 2019.

LG Energy Solution, the battery unit of South Korea’s LG Chem Ltd., is adding more capacity in Poland and, in a deal with General Motors Co., building a $2.3 billion plant in Ohio. SK Innovation Co., which has facilities in Hungary, will this year begin test-manufacturing at an initial production line at its site in the U.S. And Panasonic Corp. says it’s considering a possible site for a factory in Norway. Tesla Inc. Chief Executive Officer Elon Musk says he’ll produce battery cells at the company’s new auto plant outside Berlin.

Top Companies’ Battery Manufacturing Capacity Through 2025

In gigawatt-hours

Data: BloombergNEF

“Europe is going to see a huge surge in demand for EVs, and so the time is right in terms of building that capacity,” says Mitalee Gupta, an energy storage analyst in Boston for Wood Mackenzie. Disruptions to global trade caused by the Covid-19 pandemic have boosted the case of automakers seeking to keep key suppliers nearby, she says.

CATL and LG combined accounted for almost half of the 192.9 gigawatt-hours of electric vehicle batteries sold last year, according to SNE Research. By 2023, CATL says it plans to quadruple its fully owned and joint-venture capacity to about 263GWh, and LG’s production lines are on track to more than double, BNEF data show. SK Innovation says it’s targeting 100GWh of global capacity by 2025.

Top Countries’ Battery Manufacturing Capacity Through 2025

In gigawatt-hours

Data: BloombergNEF

The Brexit deal signed in the last days of 2020 is expected to pave the way for both the U.K. and European Union to focus on green initiatives, including developing homegrown battery companies. But new entrants will find it almost impossible to match the incumbents. Northvolt AB, founded by former Tesla executive Peter Carlsson, wants to carve out a niche as a European champion with plants in northern Sweden and Germany; it expects to have output closer to 56GWh by 2024.

“It could be very challenging, even for a relatively early mover like Northvolt,” says Tim Bush, an analyst in Hong Kong for UBS Group AG. Top producers have easier access to financing and existing relationships with key customers, and they’re adding expertise to manufacture key battery components themselves, lowering their costs, he says. The added push under the EU’s Green Deal—which is set to increase public spending on local battery manufacturing and on battery recycling to ensure Europe’s access to crucial materials—may not be enough to overcome those advantages.

Biden’s election, along with the Democratic majority in the Senate, could accelerate EV sales in the U.S. In December, Biden made a commitment to EVs, saying the federal government will purchase more electric models. While campaigning last summer, he pledged to add 500,000 charging stations across the country over the next 10 years. The moves, if they come to pass, will incentivize growth in U.S. battery manufacturing, says James Frith, head of energy storage at BloombergNEF.

There are challenges ahead for Asia’s large producers. Prolonged trade tensions between the U.S. and China could be an obstacle for the latter’s manufacturers. SK Innovation is expected to learn in February whether it will face an import ban from a trade-secrets dispute with LG Chem brought before the U.S. International Trade Commission.

Another potential threat is a dramatic leap forward in technology. Breakthroughs, such as solid-state batteries that can pack in greater range and charge faster while being safer and cheaper, could leave the sector’s key companies with vast production lines designed for outmoded technology, says Justin Mirro, chairman and CEO of Kensington Capital Partners LLC, which formed a blank-check company and last year agreed to a merger with solid-state battery maker QuantumScape Corp.

New entrants aren’t “trying to compete with CATL by doing what CATL is doing,” UBS’s Bush says. “They need to have an advantage.” —With Kyunghee Park and Chunying Zhang

Bloomberg

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