European battery makers power up for green recovery

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European battery technology startups are looking for ways to build a competitive advantage over larger and cheaper Chinese and South Korean rivals. (Reuters)
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European electric vehicle production is set to increase six-fold in the next five years. (Reuters)
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Updated 13 August 2020

European battery makers power up for green recovery

  • Startups look to quality, service and EU support to carve out market niche

LONDON: European battery makers are gearing up to take advantage of massive “green” stimulus packages unveiled since the coronavirus pandemic though many acknowledge it will be tough to match the Asian giants that dominate the mainstream market.

While Sweden’s Northvolt, and more recently France’s Verkor, are making a play for large-scale production, other European companies are focusing on niche markets and new technologies rather than taking on Chinese and South Korean firms with mass production of batteries destined for electric vehicles (EVs).

From Greek battery maker Sunlight to startups like InoBat Auto in Slovakia and Switzerland’s Innolith, firms say the challenge of building economies of scale fast to compete head on means finding niches is a more likely path to success, for now.

“Having battery giants in Europe, it’s still possible,” said Sunlight CEO Lampros Bisalas. “We just need to run and catch up, and innovate faster than the others.”

Sunlight’s Greek factory is the world’s largest producer of lead-acid batteries for automated guided vehicles, forklifts and energy storage systems and it is now shifting to lithium cells.

But Bisalas isn’t going after the EV market dominated by China’s Contemporary Amperex Technology (CATL), Japan’s Panasonic and South Korea’s LG Chem, Samsung SDI and SK Innovation .

He is focusing on lithium-iron-phosphate production, a type of battery suited to forklifts, locomotives and robots that perform short tasks with breaks in between.

“These markets are billions of dollars,” said Bisalas. “We see a very big opportunity there, because we see lithium ion producers, especially from China, being focused on EVs.”

Ever since it launched the European Battery Alliance in 2017, Europe has been pushing local firms to develop an industry that should flourish in a low-carbon future and ensure the continent is not reliant on imported products — or technology.

Now, China hosts 80 percent of the world’s lithium-ion cell production – the type of battery expected to power the fast-growing EV industry – and most of the capacity coming online in Europe over the next five years belongs to Asian firms.

But the European Union has committed €550 billion ($647 billion) to climate protection and clean technologies over the next seven years, and these plans hinge on batteries to store renewable energy — and to power EVs.

Researchers have already identified 13 European battery projects that could be eligible for EU support, in countries including France, Germany, Slovakia and Poland — though some are being driven by Asian manufacturers, such as LG Chem’s plans to expand its factory in Krakow.

European EV production is expected to increase six-fold in the next five years and EU leaders expect the battery value chain — from mining to production to recycling — will be worth €250 billion by 2025.

But some European startups concede they can’t catch up with the large-scale, low-cost Asian incumbents.

InoBat Auto, for example, a Slovak startup backed by US energy technology company Wildcat Discovery Technologies and Czech utility CEZ, is instead heading into the fast lane.

CEO Marian Bocek said the European auto industry’s reliance on imported mass-produced batteries has created a “technological sovereignty crisis,” forcing manufacturers to design cars around the batteries.

So it is planning to tailor batteries for high-performance vehicles that may need something special.

It plans to bring a 100 MWh production line online next year in Slovakia near Peugeot, Kia Motors and Jaguar Land Rover’s plants — which it said could eventually become a 10 GWh facility.

There, InoBat will test battery chemistries and make prototypes tweaked to each carmaker’s needs.

“Our focus is more on a sort of niche, on-demand battery segment for high-performance vehicles that cannot go to the LG Chems or SK Innovations of the world,” Bocek said.

Analysts say the next generation of batteries must last longer, charge faster and be safer and greener than those on the market now, and that gives European companies a chance.

“That is how Europe can conceive a competitive edge over China,” said Wood Mackenzie energy storage analyst Mitalee Gupta. “It will get competitive pretty quickly.”

Swiss battery technology company Innolith, for one, is looking for an edge with new technologies.

The company, which bought US battery producer Alevo’s intellectual property after its bankruptcy in 2017, said its labs in Germany will have prototypes this year for an NMC 811 cell that will deliver up to 315 Wh/kg (watt hour per kg).

NMC 811 cells include less cobalt than most mainstream EV batteries, which means they have the potential to deliver more power and with cheaper components.

“We cannot just take the same technology which is used, for example, in China or South Korea and copy-paste,” said CEO Konstantin Solodovnikov.

In Austria, battery technology company Kreisel Electric said it has licensed its NMC 811 technology to a European-based battery producer, which it declined to name. It already licenses its technology to Vietnamese EV maker VinFast.

Kreisel said it uses an immersion liquid cooling system to solve the fire hazards associated with lithium-ion cells in large industrial applications, giving it an edge over rivals.

But while European firms look for ways into the market, Asian rivals are building more capacity on the continent.

The first European factories for SK Innovation and CATL are under construction while LG Chem already makes batteries in Poland and Samsung has a plant in Hungary.

“We can bring to Europe our advantages in cost and product quality and service,” said Susan Zeng, co-president of CATL’s European division, which plans to start production in Germany next year.

For now, Northvolt is the only European startup that looks like it will have the scale to take on the Asian giants in its backyard — and its first factory has yet to start production.

Northvolt wants 25 percent of Europe’s battery market within a decade, a goal it says will require 150 GWh of production, more than three times the continent’s current lithium-ion capacity.

It raised $1.6 billion in debt financing last month, on top of more than €1 billion from backers including the world’s biggest carmaker, Volkswagen, and Goldman Sachs.

Northvolt’s first 40 GWh plant is due to open in Sweden next year. A joint venture with Volkswagen in Germany will follow in 2024 with a potential capacity of 24 GWh.


The Musk Method: Learn from partners then go it alone

Updated 18 September 2020

The Musk Method: Learn from partners then go it alone

  • Entrepreneur building a digital version of Ford Motor’s iron-ore-to-Model-A production system of the 1920s

Elon Musk is hailed as an innovator and disruptor who went from knowing next to nothing about building cars to running the world’s most valuable automaker in the space of 16 years.

But his record shows he is more of a fast learner who forged alliances with firms that had technology Tesla lacked, hired some of their most talented people, and then powered through the boundaries that limited more risk-averse partners.

Now, Musk and his team are preparing to outline new steps in Tesla’s drive to become a more self-sufficient company less reliant on suppliers at its “Battery Day” event on Sept. 22.

Musk has been dropping hints for months that significant advances in technology will be announced as Tesla strives to produce the low-cost, long-lasting batteries that could put its electric cars on a more equal footing with cheaper gasoline vehicles.

New battery cell designs, chemistries and manufacturing processes are just some of the developments that would allow Tesla to reduce its reliance on its long-time battery partner, Japan’s Panasonic, people familiar with the situation said.

“Elon doesn’t want any part of his business to be dependent on someone else,” said one former senior executive at Tesla who declined to be named. “And for better or worse — sometimes better, sometimes worse — he thinks he can do it better, faster and cheaper.”

Tesla has battery production partnerships with Panasonic, South Korea’s LG Chem and China’s Contemporary Amperex Technology Co. Ltd. (CATL) that are expected to continue.

HIGHLIGHTS

  • Investors awaiting ‘Battery Day’ announcements on Sept. 22.
  • Musk has hinted at significant new battery developments.
  • Partners and acquisitions have helped give Tesla an edge.

But at the same time, Tesla is moving to control production of cells — the basic component of electric vehicle battery packs — at highly automated factories, including one being built near Berlin, Germany and another in Fremont, California where Tesla is hiring dozens of experts in battery cell engineering and manufacturing.

“There has been no change in our relationship with Tesla,” Panasonic said in a statement provided by a company spokeswoman.

“Our relationship, both past and present has been sound. Panasonic is not a supplier to Tesla; we are partners. There’s no doubt our partnership will continue to innovate and contribute to the betterment of society.” Tesla did not respond immediately to a request for comment.

Since he took over the fledgling company in 2004, Musk’s goal has been to learn enough — from partnerships, acquisitions and talent recruitment — to bring key technologies under Tesla’s control, people familiar with Tesla’s
strategy said.

They said the aim was to build a heavily vertically integrated company, or a digital version of Ford Motor Co’s iron-ore-to-Model-A production system of the late 1920s. 

“Elon thought he could improve on everything the suppliers did — everything,” said former Tesla supply chain executive Tom Wessner, who is now head of industry consultancy Imprint Advisers. “He wanted to make everything.”

Batteries, a big chunk of the cost of an electric car, are central to the Musk method. While subordinates have argued for years against developing proprietary Tesla battery cells, Musk continues to drive toward that goal. “Tell him ‘No,’ and then he really wants to do it,” said a third former Tesla veteran.

The changes in battery design, chemistry and production processes Tesla expects to reveal next week are aimed at reworking the math that until now has made electric cars more expensive than carbon-emitting vehicles with combustion engines.

Tesla is planning to unveil low-cost batteries designed to last for a million miles. 

Tesla is also working to secure direct supplies of key battery materials, such as nickel, while developing cell chemistries that would no longer need expensive cobalt as well as highly automated manufacturing processes to speed up production.

Panasonic is partnered with Tesla at the $5 billion Nevada “Gigafactory,” while CATL and LG Chem supply cells to Tesla’s Shanghai factory, where battery modules and packs are assembled for its Model 3 sedan.

Panasonic recently said it is planning to expand its production lines in Nevada, which supply the cells that then go into the battery modules assembled next door by Tesla.

But the Nevada Gigafactory partnership almost didn’t happen, according to two former Tesla executives. Musk ordered a team to study battery manufacturing in 2011, according to one former executive, but eventually partnered with Panasonic in 2013.

Now, Tesla is testing a battery cell pilot manufacturing line in Fremont and is building its own vast automated cell manufacturing facility in Gruenheide in Germany.

The roller-coaster relationship with Panasonic mirrors other Tesla alliances.

During its development alliance with Germany’s Daimler, which was an early investor in Tesla, Musk became interested in sensors that would help to keep cars within traffic lanes.

Until then the Tesla Model S, which Mercedes-Benz engineers helped to refine, lacked cameras or sophisticated driver assistance sensors and software such as those used in the Mercedes S-Class.

“He learned about that and took it a step further. We asked our engineers to shoot for the moon. He went straight for Mars,” said a senior Daimler engineer said.

Meanwhile, an association with Japan’s Toyota, another early investor, taught him about quality management.

Eventually, executives from Daimler and Toyota joined Tesla in key roles, along with talent from Alphabet Inc’s Google, Apple, Amazon, Microsoft, as well as rival carmakers Ford, BMW and Audi.

Some relationships did not end well, however.

Tesla hooked up with Israeli sensor maker Mobileye in 2014, in part to learn how to design a self-driving system that evolved into Tesla’s Autopilot.

“Mobileye was the driving force behind the original Autopilot,” said a former Mobileye executive, who declined to be named.

Mobileye, which is now owned by Intel, also recognized the risk of sharing technology with a fast-moving startup like Tesla, which was on the brink of collapse at the end of 2008 and now has a market value of $420 billion.

US tech firm Nvidia followed Mobileye as a supplier for Autopilot, but it too was ultimately sidelined.

In addition to partnerships, Musk went on an acquisition spree four years ago, buying a handful of little-known companies — Grohmann, Perbix, Riviera, Compass, Hibar Systems — to rapidly advance Tesla’s expertise in automation. Maxwell and SilLion further boosted Tesla’s ability in battery technology.