Boom in Battery Factories – The Car Companies Get on Board

Dear Shareholders,

No other Western car manufacturer has set itself such ambitious goals as Volkswagen with regard to electric mobility. By 2025, the group wants to offer 50 electric cars and 30 plug-in hybrid vehicles. In the medium term, at least one million VWs with electric motors are to be produced each year in Germany alone. This means that the production target is twice as high as at Tesla. The corresponding production facilities will be converted to the new technology within the next three years. In Hanover, for example, the majority of cars produced in the future will be electric. The plant in Emden will even exclusively produce electric cars. The most important electric car there will be an entry-level model for less than 20,000 euros. A completely new plant is even to be built in Eastern Europe. The other European volume manufacturers are also pursuing ambitious goals in the field of electromobility. The demand for batteries is thus exploding.

Since German suppliers such as Bosch and Conti have (so far) pinched the issue of manufacturing battery cells – the investment risk is too great for them – VW is now apparently taking the matter into its own hands. In a cooperation with the Korean manufacturer SK Innovation, the construction of the company’s own cell factories is allegedly to be tackled.

Of the Western carmakers, only Tesla has set out early on to supply itself with the core element of electric vehicles. As early as 2014, the electric car pioneer started to build a huge battery factory, a so-called Gigafactory, together with the Panasonic group. Today, this factory with a size of around 60 football pitches (!) produces battery cells for 20 gigawatt hours (GWh) annually, the expansion to 35 GWh is currently underway.

Europe at the starting point

Tesla has already announced the construction of three more Gigafactories. So also in Europe a battery production is to be developed. Tesla’s favorite for the location is allegedly Germany. The e-auto pioneer is already present in Prüm in Rhineland-Palatinate with its subsidiary Grohmann Automation. The mechanical engineering company specializes in the construction of battery factories.

However, Northvolt is currently forging the most ambitious plans for Europe. The Swedish company plans to produce 32 GWh battery cells in 2023. Production is expected to start as early as 2020. Siemens is to help build the factory. BMW is one of Northvolt’s partners. In addition to batteries for electric cars, Northvolt will also manufacture power storage units for industrial companies and mining companies.

On a large scale, however, BMW plans to purchase the batteries it needs from the Chinese manufacturer Contemporary Amperex Technology, or CATL for short. The company, which has risen to become the world’s second largest battery manufacturer after Tesla within just a few years, announced the construction of a production facility in Germany this summer. An annual capacity of 14 GWh is planned. Last year, CATL produced battery cells of 12 GWh mainly in China.

LG Chem, Build Your Dreams (BYD), Samsung SDI and other manufacturers are also expected to start production in Europe. But the plans known so far will probably not be enough to meet the demand. According to VW alone, a cell output of 150 GWh per annum will be required by 2023. This is almost five times more than what Northvolt, the player with the largest targets in Europe to date, wants to offer.

China first

Gigafactories, however, are created in a really big style mainly in China. At the gates of Shanghai, Tesla has secured a plot of 860,000 square meters to produce cells there in the future. The area is almost twice as large as Tesla’s Gigafactory in Nevada. BYD is even planning to build a plant on an area of one million square meters. There are currently around 60 Gigafactories under construction and planning worldwide – most of them in Asia.

By 2023 the worldwide production of battery cells must and will at least triple to around 600 GWh – and then double again in a few years! These are gigantic growth figures.