LONDON – BASF is prepared to dig deep, pouring money and expertise into developing materials for electric-vehicle batteries to catch up with rivals like Tesla supplier Sumitomo Metals & Mining.
The world's No. 1 chemical maker is adding to its expansion plans in Europe, which is emerging as the next high-growth region for batteries, said Ken Lane, BASF's global head of catalysts. Battery makers in the market currently rely on Asian suppliers like Sumitomo that provide nickel and lithium.
"We are the largest chemical supplier to the automotive industry, and this is the biggest opportunity that we see in that space today," Lane said. "Asia has been the growth story till now and will continue to grow, but Europe is also going to be growing very fast over the next decade."
The company plans to build a 400 million-euro ($488 million) factory in Europe to make cathodes from a concoction of elements that determine the battery's strength and lifespan. Work has yet to begin on the plant, but BASF is already looking ahead to additional projects.
The move is part of an arms race to scale up output of cathodes to meet demand at a reasonable cost. The UK's Johnson Matthey is investing as much as $270 million, and Belgium's Umicore is spending more than $350 million on its South Korean operation as it seeks to stay ahead of the competition.
BASF will "position itself with assets" in Europe, Lane said, declining to give details. As well as increasing capacity to deal with a ramp-up in EV production, having operations on the ground helps attract and retain the scientists needed, which is currently "very difficult," he said.
Suppliers and automakers alike are honing plans to meet stringent emission regulations in Europe that have triggered record spending to develop battery-powered model lineups. The shift to EVs has been a learning curve for suppliers and auto companies alike, which have struggled with the high cost of batteries and unattractive products failing to rouse much of a consumer response.
BASF bought patents and battery material technology in 2008 and opted to largely focus on cathodes, the key battleground for battery performance. Amid hype over different types of chemistry, coupled with lofty ideals for an EV that recharges in the time it takes to drink a cup of coffee, BASF spent its first years "feeling its way," said Lane. Later, a partnership with TODA Battery Materials gave it vital manufacturing knowledge and a more solid footing to compete with Nichia, China's Ningbo Shanshan, Umicore and LG Chemical.
Global sales of battery vehicles -- both plug-in hybrids and wholly electric cars -- are expected to reach 8 million units in 2025, up from about 1 million in 2017, according to Liberum analyst Adam Collins. While most automakers plan to introduce electric models from next year, moves for a battery-cell industry in Europe have remained vague amid previous failed attempts.
Evonik Industries, the specialty chemical maker, exited its battery venture Li-Tec in 2014, selling its stake to Daimler. Demand for electric vehicle demand wasn't sufficient and keeping up with the industry's rapid development carried too much risk, the company said at the time. Daimler ceased making cells a year later.
"It's the chicken-and-egg thing here," said Lane. "If you don't have the materials, you're not going to have the batteries."
BASF hopes decades of experience with precious metals, key to catalysts used in combustion engines and petrochemical plants, will help make its push successful. The 152-year-old manufacturer has also formed partnerships, including the TODA venture and taking a stake in Sion Power to access lithium sulfur batteries.
Mastering large-scale production and working with specific customer formulas on battery materials will be crucial to winning the battle, Lane said. The company has research centers in Germany, the U.S., Japan and China is focusing on nickel-rich cathodes -- betting this type of chemistry will win out against competing formulas simultaneously in development.
"One of the benefits BASF has is that we are able to commit to these kinds of investments that are still high risk and still developing," Lane said. "We are thinking about the next 50 years, not the next 5 years."
BASF ranks No. 21 on the Automotive News Europe list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $10.37 billion in 2016.