Stellantis, CATL plan Europe factory for low-cost EV batteries

Stellantis aims to build a gigafactory in Europe to produce lithium iron phosphate (LFP) batteries as part of a possible joint venture with China's CATL.

Stellantis and the Chinese EV battery giant said on Tuesday that they had signed a preliminary agreement for the supply of LFP battery cells and modules for the automaker's electric vehicle production in Europe.

Stellantis said no decision had been made on the size or exact location of the plant. The partners are considering a joint venture in which both contribute equally.

Maxime Picat, the global head of purchasing and supply chain at Stellantis, said a "few more months" were needed to finalize the JV plan with CATL. He said it will take about three years to have the gigafactory in operation after finalizing the details.

LFP batteries will allow Stellantis to offer high-quality, durable and affordable EVs in the passenger car, crossover and small and medium sized SUV segments, the companies said in a statement.

The Citroen New e-C3 will use an LFP battery to keep its retail price low. It will go on sale next year starting at 23,300 euros.

For its EV battery needs in Europe, Stellantis is building three gigafactories, in France, Germany and Italy through its ACC joint venture with Mercedes and TotalEnergies specializing on nickel manganese cobalt (NMC) chemistry.

Picat said the deal with CATL would complement the group's electrification strategy, with LFP batteries helping cut production costs in Europe, while maintaining output of NMC batteries for more expensive cars.

"Definitely what we are aiming at is to grow those LFP batteries on multi-segment, because affordability is needed on many different segments, being passenger vehicle or potentially commercial vehicles," he said.

"Affordability is a key and that's where LFP is today the best technology you can find on the market in that compromise between autonomy and cost," Picat added. "That's where we bring that second very important stage to our strategy in Europe."

Key technology

LFP batteries have been gaining traction with automakers because they are cheaper and more stable than nickel-based cells used in most EVs. While they have a lower energy density that results in shorter driving distances, their performance has been improving with technology advances.

"Today we have zero capacity of production of LFP in Europe," Picat said. "“For the next five to 10 years, it will be a very important technology."

Stellantis' partnership with CATL would be among the most wide-ranging such agreements in Europe, where the EU is planning tighter rules around batteries to help nurture a local supply chain.

China's battery makers supply some 80 percent of cells globally, while Chinese firms also have significant mining and processing facilities both at home and abroad. The country's stranglehold on the EV supply chain has become a source of geopolitical tension with the U.S. and Europe.

CATL, which supplies Tesla, Volkswagen and Hyundai, dominates the global battery market. While its $3.5 billion plant project with Ford in Michigan has been mired in controversy, the manufacturer is charging ahead with plans to build a facility in Hungary and in January started output at a factory in Erfurt, Germany, to supply BMW.

Bloomberg contributed to this report