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Looking at the global electric vehicle battery market, Chinese battery companies are developing rapidly. According to SNE Research, in the global power battery market in 2022, Ningde Times and BYD will develop the fastest, among which Ningde Times will be the champion and far ahead. Last year, the global battery production capacity was 517.9 GWh, a year-on-year increase of 71.8%, while the installed capacity of a company in CATL reached 194.6 GWh, with a market share of 37%, and its production capacity increased by 92.5% year-on-year. BYD, also from China, is competing with South Korean battery manufacturer LG New Energy for the second position.
According to a recent research report on China’s direct investment in Europe released by Rhodium Group and MERICS, from 2016 to 2022, China’s announced FDI in the global electric vehicle value chain has tripled from 605 million euros to 24 billion euros. In the past five years, transactions in the electric vehicle sector accounted for 19% of all foreign direct investment, and in 2022, the proportion will be 58%. The study pointed out that China’s expansion in the field of electric vehicles has evolved from focusing on mining to directly building battery factories in important markets.
Let’s look at Europe, the world’s second largest electric vehicle market that cannot be ignored. The prosperity of the electric vehicle market means strong demand for power batteries. China’s direct investment in Europe is shifting to the electric vehicle value chain, especially in the field of batteries. According to Rhodium research, China’s investment in battery factories in Europe has become the main driving force for China’s direct investment in Europe. Since 2018, Chinese battery companies have announced an investment of US$17.5 billion in Europe. It is estimated that by 2030, the production capacity of Chinese battery manufacturers in Europe will account for about 20% of the total production capacity of European batteries. So far, most of China’s investment in batteries has been concentrated in battery modules and battery packs. At the same time, Chinese companies including Zhongwei and Enjie are also looking for opportunities in the upstream and downstream fields.
According to Rhodium research analysis, Europe, as the second largest electric vehicle market after China, has relatively modern charging infrastructure and generous car purchase subsidies from the government, and intends to achieve decarbonization in the field of road transportation. Furthermore, unlike Japan and South Korea, where the auto industry is developed, there are relatively few large-scale battery companies in Europe, and Europe is still open to Chinese investment. Opportunity.
At present, the European Union is passing legislation to promote the return of green technology production to Europe. However, the subsidy measures for batteries in the “Inflation Reduction Act” of the United States and the high energy prices in Europe have brought great uncertainty to the “Made in Europe” blueprint. This could lead to two investment trends in opposite directions: investment flows from Europe to the US, and Chinese investment flows to Europe. Companies including Tesla and Northvolt are slowing down their battery plans in Europe because of the Lower Inflation Act and energy prices in Europe, choosing to consider the U.S., Rhodium Research said. According to Bloomberg NEF data, in terms of investment in lithium-ion batteries, Europe’s share of global total investment will drop sharply from 41% in 2021 to 2% in 2022. It is even more difficult for Chinese companies to enter the United States, which is trying to exclude Chinese battery companies. CATL has slowed down its factory site selection plans in Carolina, Kentucky and Mexico. In this case, the European continent is becoming more and more attractive to Chinese battery manufacturers.
Chinese battery manufacturers’ investment and construction of factories in Europe is not just a “no choice” choice, they are also ushering in their own opportunities in the direction of the EU’s green policy. In March of this year, the European Commission published the draft “Net Zero Industry Law”, and battery technology is on the list of eight strategic net zero technologies. The draft sets the goal that by 2030, the EU’s capacity in strategic net-zero technologies will approach or meet at least 40% of annual demand, that is, to achieve a certain degree of European manufacturing in green technologies, including batteries.
T&G, a green travel organization, evaluated about 50 planned battery super factories (only including rated capacity of 2 GWh or more) in January this year, and predicted that 32 of them may be promoted. T&G believes that among all announced construction projects, battery production capacity will reach 286 GWh in 2025, 616 GWh in 2027 and 1395 GWh in 2030. Among them, companies with the largest production capacity include Ningde Times, Volkswagen, Freyr, ACC and Northvolt. In 2030, about 58% of European battery production will come from European companies, and 22% will come from Chinese companies. T&G reports that by 2022, 50% of lithium-ion batteries used in electric vehicles and energy storage in the EU will be manufactured in Europe. If the correct incentives are introduced and the announced projects can be launched, by 2027, 100% European manufacturing can be achieved on battery cells, and 67% can be achieved on battery positive active materials.
T&G has also conducted a risk assessment of the 1.8 TWh production capacity plan in Europe until 2030 based on the data as of February 2023 and found that 16% of them, or 285 GWh, are at high risk and 52% are at medium risk. Risk, that is, if no action is taken, by 2030, 68% of Europe’s production capacity, or 1.2TWh, will face the uncertainty of being delayed, reduced in scale or not realized. The evaluation criteria include six criteria: confirmed funds, confirmed construction sites, construction and approval status, investment from European car companies or support from EU institutions, finalized plans in the United States, and cooperation with American car companies. China’s dominance of the electric vehicle supply chain and the U.S.’s “Inflation Reduction Act” are game-changing, the report said. In theory, Europe and the United States can work together in the battery supply chain, but in reality, the supply of professional talents, corporate funds, and raw materials is in short supply, which means that global competition in battery production is a zero-sum game.
In April last year, Ningde Times’ factory in Thuringia, Germany obtained a production license for the annual production of 8 GWh of batteries. In January this year, Ningde Times launched the factory, which became the company’s first production factory outside China. Its initial production capacity is 14 GWh, which means an annual output of 30 million cells. The president of Ningde Times Europe said that Ningde Times will invest 1.8 billion euros. The factory is the first mass production of batteries in Western Europe, and the batteries will be supplied to European car companies including BMW. BMW has ordered batteries worth 7.3 billion euros by 2031 from CATL. The Ningde era is also expected to obtain a production license of up to 24 GWh.
In T&G’s risk assessment, by 2030, 32% of Europe’s battery capacity is at low risk, including CATL’s 8 GWh capacity in Germany. It can be understood that for Europe, the 8 GWh is not only the production capacity of 8 GWh, but also the certainty of 8 GWh. Putting aside other political factors, under the blueprint for European battery manufacturing planned by the European Union and the local battery incentive policy of the United States, Chinese battery companies have ushered in opportunities in Europe.
(This article only represents the author’s own point of view, editor in charge: Yan Man [email protected])