CATL was the first Chinese battery company to build a factory in Europe. Its battery factory in Germany officially started construction a year ago. The factory has an investment of nearly 1.8 billion euros (approximately RMB 14.2 billion) and plans to achieve a capacity of 14GWh by 2022 and 100GWh by 2026.
Coincidentally, both Farasis Energy and Svolt Energy have chosen Germany as the location for their European factories. Farasis Energy's investment is approximately €600 million (approximately RMB 4.8 billion), with a planned production capacity of 10 GWh, scheduled to be completed and put into operation by the end of 2022. Svolt Energy will invest €2 billion (approximately RMB 15.5 billion), planning to produce enough batteries annually to power 300,000 to 500,000 electric vehicles, with a planned production capacity of 24 GWh, scheduled to be completed and put into operation in 2023.
In fact, the aforementioned companies are not the only Chinese battery manufacturers planning to build factories in Europe. Reports indicate that Envision AESC is planning to build a mega-battery factory in Europe, reportedly near Nissan's Sunderland plant. Additionally, BYD is rumored to be planning to establish its first European battery factory in the UK.
Currently, the European new energy vehicle industry is developing rapidly. In the first three quarters of 2020, sales of new energy vehicles in Europe reached 880,000 units, a year-on-year increase of 195%. Sales continued their strong momentum in the fourth quarter, and the market is expected to surpass China to become the world's largest new energy vehicle market. PwC predicts that by 2035, new energy vehicles will account for 67% of sales in the European market.
In this context, robust market demand has led to a widening gap in battery production capacity in Europe. Volkswagen anticipates needing 150 GWh of batteries in Europe alone by 2025, while the French government projects domestic automakers' demand for batteries to reach 170 GWh by 2030. Market research firm SNE predicts that by 2023, Europe's demand for electric vehicle batteries will reach 406 GWh, while supply is projected at 335 GWh, a shortage of approximately 18%; by 2025, the supply shortage is expected to widen to approximately 40%.
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CATL, Farasis Energy, SVOLT, BYD, EVE Energy, Sunwoda, and Wanxiang secure major international orders.
As the saying goes, "Wolves travel a thousand miles to eat meat, while eagles soar ten thousand miles into the sky."
It's obvious that the reason why China's formidable battery industry has flocked to Europe to build factories is due to the massive demand for batteries from European automakers' electrification efforts. However, this is only one aspect of the reason. Another, and most direct, reason is that these battery companies have largely secured orders from European automakers.
CATL, the first company to establish a factory in Europe, goes without saying. As early as May 2018, CATL entered Daimler's battery supply chain; in July of the same year, BMW announced it would purchase €4 billion worth of batteries from CATL, of which €1.5 billion would come from CATL's newly built factory in Germany. In 2019, BMW signed another €3.3 billion order with CATL, bringing the total order volume to €7.3 billion. Meanwhile, CATL has also established cooperative relationships with several European automakers, including Jaguar Land Rover, Volkswagen, Volvo, and Bosch.
Also in 2018, Farasis Energy, a company specializing in pouch batteries, signed an order agreement with Daimler for a period of 10 years, with a total battery capacity exceeding 170GWh. In October 2020, Farasis Energy officially announced that it had signed a cooperation agreement with TOGG, Turkey's first pure electric vehicle brand.
Interestingly, at the end of 2020, Svolt Energy also entered the Turkish market, signing a contract with its leading bus manufacturer, OTOKAR. This marks Svolt Energy's second European customer contract, following its previous order with the French PSA Group. Prior to this, Svolt Energy signed a procurement contract with the French PSA Group to supply batteries for PSA's electric vehicles, with an order demand of approximately 7GWh.
It is worth noting that in September 2020, foreign media reported that BYD would supply Daimler with the latest lithium iron phosphate "blade batteries". In addition, there were reports that "BYD is negotiating with Jaguar Land Rover on battery supply and production".
Securing orders from European automakers and building factories in Europe seems logically a natural progression. However, does receiving orders necessarily mean building a factory there? Not necessarily. Ultimately, each case needs to be analyzed individually. For example, EVE Energy hasn't gone there, Sunwoda hasn't made any major moves, and Wanxiang A123 hasn't taken any action either, yet they've all secured enviable large international orders.
Also in 2018, EVE Energy signed an agreement with Daimler to supply ternary lithium-ion pouch batteries; in July 2020, EVE Energy's subsidiary, EVE Power, received a supplier designation letter from BMW. In April 2019, Sunwoda announced it had received a designation letter from the Renault-Nissan Alliance, with an estimated demand of 1.157 million units for related models, conservatively estimated at over 10 billion yuan. In July 2020, Wanxiang A123 was confirmed to have secured a 10 billion yuan power battery order from Volkswagen.
However, while these companies haven't yet established factories in Europe or other overseas locations, this doesn't mean they won't in the future. The advantages of localized manufacturing are obvious. As one industry leader put it, "It enables the formation of localized power battery supply capabilities, bringing us closer to customers, providing more timely and effective product solutions, and responding to user needs more quickly, thereby enhancing the competitiveness of our products globally."
In other words, localized battery production enables "nearby supply" to key customers, allowing them to be closer to the end market, optimize transportation costs, and meet the needs of providing high-quality services. Daimler, which has signed large orders with several Chinese companies, believes that battery localization is a crucial factor in the success of its electrification strategy and a key link in flexibly and effectively meeting the demands of the global electric vehicle market.
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China's lithium battery technology has been exported.
It is worth noting that the establishment of factories in Europe by Chinese battery manufacturers is not simply a matter of providing battery production capacity, but rather a systematic "package" of functions. For example, CATL's Thuringia battery factory will "introduce qualified Chinese suppliers of raw materials, components, systems, and services," meaning it will shift from exporting products to exporting technology.
In fact, it's not just Chinese battery manufacturers that are expanding into Europe and other regions; a whole host of Chinese material and equipment companies are also making a major westward move.
In March 2020, Kedali, a leading manufacturer of precision structural components for lithium batteries, announced its plan to establish a wholly-owned subsidiary in Germany and invest no more than €60 million (approximately RMB 480 million) in building a production base there. In August 2020, Tinci Materials announced its plan to invest RMB 275 million in a 100,000-ton-per-year lithium battery electrolyte project in the Czech Republic. In November 2020, Enjie Materials planned to build a wet-process lithium battery separator production line and supporting facilities in Hungary, with a total investment estimated at approximately €183 million (approximately RMB 1.4 billion).
In addition, Chinese electrolyte material companies such as Shenzhen Capchem Technology, China Shida Shenghua Chemical, and Jiangsu Guotai Chemical, separator manufacturers such as Xingyuan Material, and equipment manufacturers such as Lead Intelligent Equipment and Hangke Technology, have all announced plans to build factories in Europe. It's easy to foresee that more and more Chinese companies will join this trend in the future.
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Conclusion
However, it should be pointed out that although it is now commonplace for Chinese battery supply chain companies to set up factories in Europe, and many media reports on it in a very casual way, this commonplace situation is actually hard-won.
The Chinese say that 60 years is a cycle. More than a hundred years ago, Europe gave birth to the world's first internal combustion engine automobile, while the great Eastern country with a history of five thousand years still did not have its own complete automobile industry 60 years later, and the cars running on its vast land were all "foreign cars".
Today, after two cycles of sixty years, China has the world's most complete new energy vehicle industry chain and has become the largest producer of power batteries. The rising power battery force of China has also grown into a "tiger and wolf army" capable of counterattacking Europe.
History often unfolds in such a paradoxical way. Often, when a nation or industry enters a bull market, it's unstoppable!
