Cell makers look to start production in Europe

Several companies are developing plans to potentially manufacture lithium-ion cells and cathode active materials in Europe as the concentration of global production in Asia-Pacific threatens to expose European carmakers to rising import costs and supply bottlenecks as they build out production of electric vehicles (EV). Locally produced cells would also enable European carmakers to bring their own EV lines to market more quickly.

Sweden's Northvolt plans to make use of Sweden's small but domestic reserves of critical battery metals including cobalt, director Martin Anderlind told the Battery Show conference in Hannover.

Separately, Germany's TerraE plans to develop a plant with a capacity of 34 GWh/yr and aims to use less cobalt, ceo Holger Gritzka told delegates. TerraE's project aims to mirror the gigafactory projects of electric vehicle producer Tesla in the US. These projects remain some way off full commercial production.

The Asia-Pacific region has come to dominate the manufacturing of lithium-ion cells and cathode active materials despite European electric vehicle (EV) sales, accounting for 25pc of total volumes last year.

"The largest five to six companies producing lithium-ion cells are all in Asia-Pacific, capturing up to 90pc of the market globally,"Wolfgang Bernhart, senior partner at consultancy Roland Berger, told delegates.

Wolfgang estimated that the top three companies together hold a 67pc share of the market with South Korea's LG Chem the largest at 29pc, Japan's Panasonic has 21pc and China's CATL 17pc.

Much of this consolidation of the industry has been down to the rise of EV consumption in China, which accounted for half of all total world EV sales volumes last year, and existing consumer electronic cell manufacturing in the region.

Global electric vehicle demand is expected to reach 750 GWh/yr by 2025 and 1,500 GWh/yr by 2030. But Europe is yet to establish an active cell producing facility able to compete with the large scale operations in Asia-Pacific.

This could leave European automotive manufacturers exposed to rising import costs and supply bottlenecks alongside continued high raw material prices, particularly for cobalt.

"The projected large volumes [of cells] required by European car makers when demand ramps up would make importation from Asia unfeasible. The lead time for a shipment of cells from Asia-Pacific is currently around six weeks," Matthias Zentgraf, president of European business for China's CATL, said.

Short of being able to produce cells in large volumes on the continent, European car manufacturers including Volkswagen could establish formal ties with cell manufacturers in Asia-Pacific in order to hedge against rising costs for cobalt, nickel and lithium or consider their own internal cell production. "We are establishing a centre of excellence to evaluate this technology [cell production] and to see if it's viable. It seems more cost effective to have a nearby supply rather than rely on imports," Frank Blome, vice president of battery cells at Volkswagen, said.