Europe risks becoming “an assembly plant” for Chinese battery manufacturers unless the continent puts in place regulations that ensure technology and skills transfer in return for state aid, according to a new study.
Transport & Environment, an environmental campaign group, has warned that current partnerships between Chinese battery makers and European car companies were too focused on securing short-term battery supplies without any regulatory framework for knowledge sharing, leading to geopolitical and security risks down the road.
“We can spend another 10 or 15 years trying and failing with companies like Northvolt,” Julia Poliscanova, senior director at T&E, said. “Or we can [benefit from] where there is expertise and use it to catch up quickly, just like the Chinese actually did in the last 20 years.”
The warning comes as Europe is scrambling to recraft its strategy to reduce its reliance on China by building local supply chains for green technologies. Its ambitions took a hit with the recent collapse of Northvolt, the continent’s biggest battery hope.
To fill the gap, more European carmakers are partnering with Chinese battery makers to ensure battery supplies for the aggressive rollout of electric cars to meet tougher emissions rules.
In December, Stellantis said it would build a €4.1bn lithium battery factory in Spain with China’s CATL, the world’s largest battery maker. According to the Spanish government, the project had received almost €300mn in state aid. But no conditions on technology or skills transfer were set.
Stellantis said it would not comment on its contract with CATL.
Volkswagen is also collaborating with China’s Gotion High-tech for its battery plant in Salzgitter. The German carmaker became Gotion’s largest shareholder when its Chinese subsidiary invested €1.1bn in 2020, but there appears to be little intellectual property or knowledge transfer, according to T&E’s study.
Volkswagen said there was “considerable knowledge transfer” between the partners, including shared and separate IPs as well as staff exchanges.
“Without more European requirements, we just won’t learn. We’ll just be an assembly plant,” Poliscanova added.
More than 90 per cent of electric vehicle and storage batteries are produced by South Korean and Chinese companies, while a further 40 per cent of confirmed battery gigafactories are provided by the same Asian players, according to the campaign group.
US carmakers have opted to partner with Korean battery makers, with Ford, which also has a partnership with China’s CATL, striking a joint venture with SK. General Motors has paired up with Samsung SDI. In cases where they have partnered with Chinese manufacturers such as BYD, Washington has set requirements for skills transfer and control over the tie-ups.
Brussels now wants Chinese companies to transfer intellectual property to European businesses in return for EU subsidies and is reviewing its regulations. But the requirements being considered are at a much smaller scale compared with the ones enforced in China as well as in the US.
The warning comes at the very moment that European companies are trying to catch up with Asian companies, but are facing a slowdown in demand for EVs in the region and a squeeze on funding.
Yann Vincent, chief executive of French battery maker Automotive Cells Company, told the Financial Times that the Stellantis, Mercedes-Benz and TotalEnergies-backed joint venture, recently paused plans to expand its manufacturing footprint from its Dunkirk base to factories in Germany and Italy because of a slowdown in the EV market.
This meant that €4bn of project financing agreed for the expansion was no longer available, and the company instead agreed a €845mn bank loan guaranteed by Mercedes and Stellantis to continue to develop its Dunkirk based sites.
“We saw that the market was slowing down and so we had to be careful with massive investments,” said Vincent.
Benoit Lemaignan, chief executive of another French battery start-up Verkor, said that the slowdown in EV demand had also made financing more difficult.
To respond to financing pressures in the industry, ACC is considering developing a low-cost battery that would be based on lithium-iron-phosphate technology, a cheaper but less dense battery similar to the technology developed by CATL. However, Vincent warned there was “no certainty on whether it would be possible”.
Chinese pioneers are far ahead in this sector of the industry, and Northvolt and other European companies have so far focused on nickel-manganese-cobalt batteries, which are expensive but require less frequent charging.
Another main challenge for European companies was the production of batteries at scale, according to Marc Alochet, a former car sector engineer and researcher at France’s École Polytechnique.
He supported the prospect of skills transfers across the “entire value chain” of battery development, pointing out that China had demanded transfers from European carmakers manufacturing in the country at the beginning of the century.
“The delay is very significant but that would help allow [European companies] to accelerate their ramp-up,” he added.
