European Battery Companies Face Uphill Battle to Meet Surging EV Demand — Talking Markets
Summary
European battery startups are grappling with how to make less-expensive batteries at scale as they race to meet demand from an electrifying car industry, and while investors are still buying in, there is less enthusiasm than a few years ago.European battery startups are grappling with how to make less-expensive batteries at scale as they race to meet demand from an electrifying car industry, and while investors are still buying in, there is less enthusiasm than a few years ago.
Battery production capacity to meet demand from car makers, whose electrification march is fueled by European Union climate policies, simply doesn’t exist yet in the EU, said Gert Meylemans, the general manager of Eurobat, an association that represents automotive and industrial battery manufacturers. Eurobat commissioned a study in 2019 that suggested battery supply would match demand by 2024. Now, the group says that parity won’t even happen by 2030.
Meanwhile, the penetration of fully electric cars in the EU automotive market hit an all-time high of 20% of all new sales in August, according to the European Automobile Manufacturers’ Association.
Investments in Europe’s battery industry continue, but Eurobat says investor enthusiasm has been dampened by the war in Ukraine, pandemic effects, supply-chain disruptions, higher raw materials and energy prices, and a complex regulatory framework in the EU. Europe is also competing with the U.S. and its attractive subsidies for the industry through the Inflation Reduction Act, which the EU hasn’t matched.
“These things have really disrupted the whole industry, in a way, both for the established players but also for the newcomers," Meylemans said.
As part of the Eurobat study, which will be updated in October, the group monitored announcements of EU battery firms and found that several haven’t started—or will not start—production because of the challenges facing the industry, Meylemans said.
While facing these headwinds, battery makers must also develop technology to make electric-vehicle batteries smaller, lighter, more efficient and cheaper, both for the sake of their own profitability and for that of their car-making buyers, said Francisco Carranza, the chief executive officer at Basquevolt, a battery startup in the Basque Country in Spain.
“The investors have become much more cautious when investing in battery players, particularly because they understand that this is not that simple, and you are stepping into a geopolitical fight," Carranza said, referring to the lithium market and government subsidies.
Before leading Basquevolt, Carranza helped launch Automotive Cells Company, or ACC, the battery joint-venture of Stellantis and TotalEnergies (and later, Mercedes-Benz). Its goal—and that of similar ventures by car makers—was to gain control over the battery component, the lynchpin to electric-vehicle profitability, he said.
Basquevolt is developing a solid-state lithium battery, which requires fewer components and has a higher energy density than liquid-state batteries. Carranza’s goal is mass production that is inexpensive enough for car companies to turn a profit, even with bottom-rung models. Basquevolt’s tech is proprietary, but Carranza said his goal is to rely less on the expensive, unpredictable lithium market under the belief that conventional liquid lithium-ion batteries are now a commodity with little-to-no technological evolution left.
“The main enemy we have in electrification is the cost," Carranza said. “We need to figure out how to reduce the cost of the battery pack. Otherwise there is a big industry that is going to be suffering a lot with electrification."
Carranza said the company is in talks with European and Asian car makers and hopes to select one in the next six months that will become its main driver of growth. Basquevolt is 75% owned by private companies but counts the Spain and Basque governments as investors as well. It aims to start production by the end of 2027.
Sweden-based Northvolt—Europe’s largest home-grown cell-maker supported by Volvo, Volkswagen and Goldman Sachs—has just raised $1.2 billion for its expansion in Europe and North America despite headwinds.
“Given the massive scale of the project, it’s always been a huge undertaking to secure capital, but it hasn’t been the greatest challenge," Anders Thor, vice president of communications and public affairs, said. “It is obviously harder post-Ukraine than before Ukraine, as it is for everyone. But we have so far been pretty successful at raising capital and we will have to continue to raise it for the factories we are planning for multiple years."
Thor said Northvolt is focused on production for a high-demand industry, which he says is more capital-intensive than developing different chemistries.
“The key is not producing one particular battery cell," he said. “The key is mass producing multiple millions of the exact same quality that are reliable and green."
Write to David Sachs at david.sachs@wsj.com
