PARIS -- As electric vehicle sales gain momentum in Europe, calls are increasing for battery cell makers to locate production on the continent rather than Asia.
One company hoping to fill that need is Verkor, a French startup that is seeking an initial 1.6 billion euros in financing to set up a cell factory that would be operational by 2023 with an initial capacity of 16 gigawatt hours. Verkor is working with Schneider Electric, the French energy company, as a technical partner.
Verkor says the new factory will create more than 2,000 jobs, and would need a space of at least 500 acres, most likely in France.
So far, most European automakers have sourced their cells from Asian-based giants such as LG Chem of South Korea, which has a factory in Poland, and CATL of China, which is building a European factory in Germany. According to the World Economic Forum, Chinese battery manufacturers command 85 percent of the global lithium ion market – while Europe has only a 3 percent share.
A McKinsey study in 2019 found that Europe had just 29 gigawatt hours of battery production, a figure that is likely to grow to 290 gigawatt-hours by 2025, with more than 10 different producers. But at the same time, China’s capacity will go from 294 gigawatt-hours to about 600 gigawatt-hours, according to McKinsey.
One potentially big homegrown player is Northvolt of Sweden, which recently secured $1.6 billion in debt financing. Volkswagen Group and BMW are also helping to fund Northvolt, which plans to build Europe’s largest lithium-ion battery plant in Sweden, and eventually take a 25 percent share of the market.
BMW recently signed a $2.3 billion battery order with Northvolt, and VW Group plans to build a German cell factory with the company to supply its own vehicles.
PSA Group is working with the French energy company Total to build two cell factories, one in France and one in Germany. Renault Group has signaled its intention to join the partnership.
In the UK, the startup Britishvolt is planning a battery factory near Aston Martin’s SUV plant.
Still, there will be plenty of business to go around for companies such as Verkor. Automotive experts and executives expect that battery-electric vehicles will make up a majority of new car sales in Europe as soon as 2030, as emissions regulations make internal combustion engines increasingly obsolete.
"The EV market is clearly accelerating pretty fast," said Verkor CEO Benoit Lemaignan, with more choices for buyers, prices starting to come down and the cost of ownership reaches parity with internal combustion vehicles. “Next year and 2022 we will really see EVs taking over, at least symbolically.”
Verkor has already financed a feasibility study, and has talked to a number of automakers about their requirements. Lemaignan said the company was seeking funding from a variety of sources, including private investment, automotive companies and government-backed investment banks such as Bpifrance.
If all goes as planned, a site -- likely but not necessarily in France -- will be selected in the first half of next year and production would start in 2023.
Verkor will primarily target passenger EVs, but there are also opportunities in heavy trucks and buses, Lemaignan said. One niche that could potentially be interesting is the conversion of internal-combustion vehicles to electrical power, not only passenger cars but also industrial vehicles such as cranes, he said.
Lemaignan said a European gigafactory could "clearly" be competitive on price with Asian suppliers, noting that labor costs and administrative costs each made up around 5 percent of the battery price, the same as shipping. Having a cell factory close to an auto plant would eliminate most of the shipping costs of batteries built in Asia.
However, he said, there are other important reasons to locate battery cell production in Europe. "The battery is between 30 percent and 45 percent of the cost of a car. So if we as Europeans or French must rely only on Asian producers, we are substituting our dependency on oil from the Gulf to dependency on batteries from Asia," he said.
"This is a unique opportunity to increase our sovereignty in mobility," he said, "not only financially but also technologically."