EU Lags Asia in Race for Car Batteries

Cars of the future will abandon petroleum products in favour of new technologies such as fuel-cells (hydrogen), synthetic gas, or electric batteries. However, the shift in technology comes with a shift in market players in the industry, as Asian economies have positioned themselves as global leaders in the manufacture of battery cells. They own almost 90% of global manufacturing capacity, while European manufacturers are lagging behind by at least five years.

If European automakers do not want to depend on Asian companies to supply the key components of the supply chain for electric vehicles (EVs), they only have a few months to set up a solid and clear strategy, argued Carole Mathieu, Research Fellow at the Institut Francais des Relations Internationales (Ifri) on March 28 in Brussels.

Forecasts of EV market share are being revised upwards, predicting that by 2020, 4% of global vehicles will be electric, and between 9 and 15% will be by 2025. Ifri sets the global uptake between 2020 and 2022. The European batteries market is projected to keep increasing, creating a market worth €250bn/year by 2025, according to the European Commission.

But Europe has five gigafactory projects, three of them led by Asian companies (LG, Samsung, and SK). Ifri estimates that 40 such factories would be needed to cover global demand from automakers by 2025.

There is still a window of opportunity for new players to join the battery-manufacturing race, but not for much longer, as the know-how must be acquired by the early 2020s. Meanwhile, European automakers are unwilling to commit to European manufacturers until the latter can offer competitive and effective products on par with Asian factories, which is still some way off.

This may change with the “European battery Alliance”, an industry-led initiative launched late February this year, which aims to create “a competitive and sustainable” battery cell manufacturing in Europe supported by a full EU-based value chain. The initiative is led by French battery maker Saft, part of energy group Total, joined by European partners Siemens, Solvay and Manz.

The European Commission is also planning to adopt an action plan on electric batteries by mid-May, which should include a strategy to mobilise investment for around €20bn and regulatory support.