A Chinese battery company called Contemporary Amperex Technology Ltd (CATL) has chosen a site in eastern Germany to build a battery-cell factory that will help supply the country’s major automakers as they shift to building more and more electric vehicles.
Volkswagen Group, BMW, and Daimler have all set targets to make and sell more electric vehicles in the coming years, but making the economics work out on battery supply has often proven elusive.
According to Agence France Presse (AFP), German Chancellor Angela Merkel will meet with Chinese Prime Minister Li Keqiang today in Berlin. Reuters notes that the Chinese prime minister will participate in a signing ceremony related to the decision to build a CATL factory in Erfurt, a city in the German province of Thuringia.
On Monday, BMW also announced that it would buy €4 billion ($4.7 billion) in battery cells from CATL, which already has factories in China. €1.5 billion ($1.7 billion) of BMW’s purchases would be made in the EU and €2.5 billion ($2.9 billion) would be made in China. BMW’s China-based purchases reflect global market trends: China already consistently outstrips most other countries in electric-vehicle purchases per year. And BMW already has automotive production facilities in the country due to the fact that, until recently, foreign automakers were required to partner with Chinese-owned factories if they wanted to sell cars in China or else face a steep tariff. China recently decided to gradually end that policy, with preference for electric vehicles.
“The Chinese firm will supply the cells for the electric Mini and for BMW’s upcoming ‘iNext’ electric limousine, slated for production from 2021,” AFP noted.
AFP and Reuters both reported that Volkswagen has also secured a deal with CATL to buy electric-vehicle batteries, although the size and scope of the deal is unclear. However, we know that CATL, along with Samsung and LG Chem, is expected to deliver $25 billion worth of batteries to Volkswagen.
According to AFP, German business daily Handelsblatt reported that Daimler is also considering a purchase agreement with CATL. Daimler has already spent significant amounts of money to build out lithium-ion battery assembly in Germany. CATL’s cells would likely be assembled into full batteries at such a plant.
CATL’s move into the German auto market comes none too soon. Volkswagen made promises to a variety of countries to build more electric vehicles in the wake of its global diesel scandal in which millions of diesel cars were found to be emitting nitrogen oxide in excess of legal limits. The company flirted with building its own batteries and reportedly tried to secure a contract for cobalt, an important mineral for lithium-ion batteries that primarily comes from conflict-rife areas of the Democratic Republic of Congo. No deal was made, however.
Bloomberg reports that the major car makers in Germany have been reluctant to commit massive amounts of money to building electric-vehicle battery cells competitively when Chinese firms might best them. Tesla is one of the few vehicle companies that has dedicated significant resources to battery design and supply at the Gigafactory in Sparks, Nevada.
Bosch, a German vehicle-parts supplier that works with big-name automakers, recently decided not to pursue battery-cell development and manufacture due to ample global competition, Bloomberg reported.