The emancipation of the car bosses - DER SPIEGEL
This article originally appeared on DER SPIEGEL magazine and was translated.
MOBILITY For years, Europe left the battery business to the Asians. Now VW, Opel and others want to catch up - and are investing billions. But building new factories is not enough...
The old Opel plant in Kaiserslautern looks like an ageing industrial monument. The factory hall, where up to 6,000 people once worked, is virtually empty. A few young men and women in grey overalls screw in the latest diesel engines. It smells of lubricating oil.
But in a few months, the old world of cars will give way to the new.
Excavators and bulldozers will raze about two thirds of the current factory. Instead of combustion engines, small silver boxes for electric vehicles will be produced in the future: battery cells, the key components of electric cars.
Opel's parent company, Stellantis, is planning to build a gigafactory on an area of about 48 football fields. A brand new gigafactory, in collaboration with Mercedes-Benz and the French oil group TotalEnergies via its subsidiary Saft. Production will start in 2025.
From 2030 onwards, in its final expansion phase, more than half a million batteries for electric vehicles should be manufactured there. The federal government and the European Commission are supporting the project with half a million euros. ACC is also building two further battery factories in Italy and France - a model for the whole of Europe, a "battery Airbus", as French President Emmanuel Macron put it at the opening of the consortium.
At present, according to the European Commission, only 1 per cent of the world's lithium ion battery production is produced in Europe, while China produces 66 per cent. Demand is expected to increase dramatically, not just because of electric cars: the batteries are also needed for wind farms and solar installations.
Billions of dollars in tax revenues will be released. By 2030 alone, some 30 battery cell factories are planned to be built on the continent. They will be operated by carmakers such as Stellantis or Volkswagen, by battery specialists such as Northvolt in Sweden, but also by the Chinese world leader CATL, whose new Gigafactory in Thuringia will produce for BMW and other customers.
But with such offensives, will Europe really be able to free itself from the Asians?
Until a few years ago, batteries were regarded as mere components in our country. Politics and industry left the battery market in the hands of entertainment giants such as Panasonic of Japan or Samsung of South Korea. "Today we have moved on," said Chancellor Olaf Scholz (SPD) at the launch of the construction of the VW battery plant in Salzgitter.
Chairman of the Board Diess in Salzgitter during the laying of the foundation stone for the VW battery factory, which will start production by 2030.
Dependence on global supply chains is "too great a risk". During his visit to Canada earlier this week, the Chancellor explored the possibilities of sourcing more from North America in the future.
Few recognised the danger in time. The outgoing VW boss, Herbert Diess, then still a manager at BMW, had already been to China at the beginning of the last decade to visit a fast-growing start-up: CATL. The battery specialist was known only to specialists, its turnover was less than 100 million euros.
Today, CATL is the world's largest battery manufacturer - and its stock market valuation is twice that of Volkswagen. Diess lobbied the top managers of German suppliers such as Bosch and Continental to get into battery production too - to no avail. The VW boss was forced to make his own batteries. By 2030, the group wants to invest 20 billion euros in collaboration with partners, build six cell factories in Europe - and thus generate 20 billion euros in turnover. There is a good chance that the hunted will become the hunters again.
Opel is the best example. The brand was considered an end-of-life model, and for some even a candidate for bankruptcy. After a radical austerity cure by new owner Stellantis, there is at least enough money to invest in the future.
Peter Winternheimer, a sturdy palatine man with a full beard, has been an Opelian for more than 25 years. He has lived through many serious crises. Now the 53-year-old former executive has joined the battery consortium Automotive Cells Company (ACC) as vice president of the ACC plant in Kaiserslautern, where he is responsible for transforming the engine plant into a Gigafactory.
To do this, he first wants to hire just over 2,000 people. In his new role he feels like a start-up entrepreneur in the Silicon Valley, says the engineer. Except that his office is not in a trendy loft in California, but in a two-storey building in Kaiserslautern, Germany. The office chairs are worn out, coffee is drunk from the vending machine in plastic cups. There is no milk. But there is a vision! "Our goal is to become a European company with world-leading battery technology," Winternheimer says proudly. In the second half of the decade, the consortium also wants to produce solid state batteries. The new cell technology allows for greater autonomy and uses a solid, non-flammable electrolyte. This technology is seen as a chance to finally catch up with the Asians.
If ACC, Volkswagen and other ambitious European projects come to fruition, it will be possible to meet the demand on the continent. This is the conclusion of a BCG survey: the demand for batteries for light and heavy vehicles in Europe will be around 860 gigawatt hours in 2030, with an announced capacity of over 980 gigawatt hours.
Germany already seems to be slowly coming off the Chinese drip. In 2021, it will have more lithium-ion batteries from Europe than from the People's Republic for the first time, reports the German Electrical and Digital Industry Association.
This is a step closer to independence, but still a long way off. Until now, Europeans have generally been content to assemble the valuable cells from Asia into batteries. And the many gigafactories that are being talked about so much are still only in their infancy. According to the BCG survey, the concrete projects cover only 420 gigawatt hours, which is less than half of the real need.
Moreover, production in Europe does not yet make the continent self-sufficient. Europe remains dependent on raw materials sourced from other parts of the world. Cobalt comes mainly from Congo, lithium from Australia, Chile and China. As far as metal processing is concerned, the People's Republic is the place to be. It is home to 58 percent of lithium production and almost two-thirds of the world's cobalt production.
Dependence on Asia
Global market shares of battery manufacturers in the first half of 2022, in percent
The German automotive industry has failed to fully understand and meet the challenges posed by the field of battery cells, says Dirk Harbecke. The president of the German-Canadian start-up Rock Tech Lithium is calling for manufacturers to invest not only in battery factories but also in the extraction of raw materials. Or in so-called 'converters', which turn raw lithium into high-quality lithium that can be used for car batteries.
In Europe, says Harbecke, entire "battery clusters" would have to be created. The Rock-Tech boss is therefore planning to build a factory in Guben, in Brandenburg, near the Polish border. Lithium from his own mine in Canada will be produced there and sold to battery manufacturers. In Grünheide, less than an hour and a half's drive away, Tesla is already producing electric vehicles, and in the future batteries will also be manufactured there. In Schwarzheide, Brandenburg, the chemical giant BASF is building a battery recycling plant.
"You can't change the production of battery cells. You can't regionalise overnight," says Harbecke, "but we could do it in ten years”.
The Europeans have a long way to go, as they feel when it comes to building their gigafactories. Even in mechanical engineering for battery production, the Chinese are leaders. The facilities and equipment for producing cells, laments Diess, the outgoing VW boss, "now come almost exclusively from Asia".
Canada must play a central role in future supply
Mercedes-Benz, Markus Schäfer is already calling for an "initiative of the car manufacturers in Germany" with the aim of "strengthening the battery factory facilities". Mercedes-Benz itself has already accomplished an astonishing transformation. Until recently, the car manufacturer regarded battery cells as a "commodity", a simple subcontracting part like windscreen wipers or power windows. An own cell production in Kamenz, Saxony, was abandoned by the group in 2015. In the meantime, the Stuttgart-based company has changed its mind: development chief Schäfer wants to "cover the cell requirements for the electric cars we will produce in Europe in the future." Mercedes-Benz now concludes direct contracts with suppliers, for example for lithium. In addition, we are increasingly looking for sources of raw materials in Europe and North America," explains Schäfer. An extensive collaboration with Rock Tech Lithium is planned. Both Mercedes-Benz and Volkswagen signed letters of intent with the Canadian government on Tuesday. The country is to play a central role in the supply of raw materials for batteries in the future. Volkswagen is planning to acquire stakes in several Canadian mines and operators.
The desire of the automotive companies for regional independence is very much in line with the wishes of politicians. The US government, for example, wants to force car manufacturers to use more and more raw materials from friendly countries. 40 percent of battery materials would then come directly from the US or from a country with which a free trade agreement has been concluded - China is not one of them.
By the end of the decade, this quota is expected to rise to 80%.
The EU is also working on a Raw Materials Act to reduce raw material imports. According to the European Commission's Joint Research Centre, Europe's raw material deposits have been little explored until now. Efforts to exploit key battery materials locally are limited to Portugal, Scandinavia and the Balkans - and are often hampered there by bureaucracy and citizens' initiatives.
Experts doubt that the continent will soon become a powerful producer of raw materials. The development of a major mining industry will cost billions and lead to lawsuits," fears Ferdinand Dudenhöffer, director of the Center Automotive Research. For the time being, mass production in China is running at full capacity - a huge cost advantage. According to Dudenhöffer, battery and car manufacturers should source the coveted metals from as many supplier countries as possible in order to protect themselves against risks. However, the goal of total independence from the People's Republic is "misplaced". If Europe were to source its raw materials only from safe countries of origin such as Australia, the USA or Canada, a "split market" would be created: with expensive cells from Europe and North America - and cheap products from Asia. The beneficiaries of this scenario would of course be the Chinese, who would then be able to flood the world markets with significantly cheaper electric cars.
Simon Hage, Martin Hesse
Read the original article in German below.