How InoBat aims to stand out from VW, Tesla, CATL in battery cell sector

InoBat Auto, a Slovakia-based battery cell making startup that was formed in 2019, is looking to capitalize on a predicted sixfold increase in electric vehicle production in Europe in the next five years. The company anticipates that the installed demand for battery plants in Europe will be 550 to 600 gigawatt hours by 2030, leaving a shortfall in installed capacity of up to 150 gigawatt hours by that time. With so much of a gap to close InoBat Auto's head of business development, Jonathan Carrier, says there is plenty of space for current and new players to establish themselves in Europe. He says the company is currently testing its own battery cells, and by 2024 it aims to start producing at its Slovakia Gigafactory, which is close to plants owned by Jaguar Land Rover, Kia, Jaguar Land Rover and Volkswagen, as well as within a 500-kilometer radius of facilities that make 2 million vehicles a year. To appeal to those potential customers and stand apart from rivals, Carrier says the startup will showcase its ability to quickly bring new battery technologies to market. He says InoBatt can do so while still delivering quality, reliability and affordability. He recently spoke with Automotive News Europe Managing Editor Douglas A. Bolduc.  

Could you outline InoBat's current situation and provide the outlook for the company?  

InoBat started a couple of years ago within the IPM group. It was was set up by our CEO, Marian Bocek, with the understanding that Central Europe has become the manufacturing powerhouse of the European automotive industry. That is particularly true about Slovakia, which produces more cars per capita than anywhere else in the world. Its home to the second major factory for the Volkswagen Group, Jaguar Land Rover has a plant there, as do PSA and Kia. Those cars will eventually go electric, and they will need batteries and batteries that are sourced locally.

So, the ambition was to start to build this capability for battery production in Central Europe to supply the significant shift of manufacturing of automobiles that has occurred in the kind of last 10 to 20 years. We are focusing on is trying to accelerate the delivery of new battery technologies to the market. By that I mean that we not only want to speed up the process for identifying those technologies, moving them out of the lab and into the factory, but we also want to do so so in a way that ensures reliability, quality and competitive cost because we will do this at scale. We see ourselves as an integrated player that turns innovation into production. We also want to support the supply chain upstream with the establishment of the value chain in terms of raw materials and play a role downstream in terms of recycling.  

Some estimates say Europe's share of the global battery production market will rise to 31 percent by 2030 from just 7 percent last year. How much of a share does InoBat want in the next 10 years?  
Our estimates suggest that that market, as you have identified, will grow 17 fold in 10 years. That's a 31 percent compound annual growth rate to get to that share of the global battery industry. This is being driven by the wave of electric vehicles that are coming to market from all of the major automakers. As a consequence, we anticipate that the installed demand, not the capacity, but the demand, will exceed 550 to 600 gigawatt hours by 2030. That years is a real inflection point because that is when the UK plans to ban the sale of combustion-engine cars, with many other markets in the region following suit. At that point, we believe that there will still be a shortfall in installed capacity of about 100 to 150 gigawatt hours.

Therefore, there will be insufficient capacity, despite the best efforts of the European Union to meet prevent that because the pace of change is faster than anyone anticipated. What InoBat wants to do is try to flip the market from a supply-based approach, where cells are developed and the car manufacturers have to take those cells, into an approach driven by customer demand. What that means is we want to work in partnership with car manufacturers -- as well as the commercial vehicle makers, off-highway customers and aviation companies because all of these sectors have to go electric. To do this we ask ourselves: How do we engineer the best cell? How do we customize that cell to meet their needs? So, because we are attempting to flip the model it's very difficult to say to you how much of the market we are going to take. Ultimately, the value is through those partnerships and creating cells that are tailored to our customers' needs. That where we create the value, so, market share becomes less relevant because if you can build partnerships, you also build long-term value as well as the ability to grow the market with your customers.  

Your rivals in Europe include startups such as Northolt in Sweden and British Volt as well as automakers such as Tesla and Volkswagen Group, not to mention established battery cell giants CATL and LG Chem. How will InoBat stand out in such a competitive market?  

You're right, there is a transcontinental race for capacity in Europe. In 2019 alone 60 billion euros was invested in Europe in battery cells and it was triple that in China. We anticipate that there is more than enough opportunity for every player. But like we have we discussed, there isn't one rule that fits all that says every battery manufacturer will be the same. Some will be very focused around a standardized product that's built an absolute super scale. There are others that will be positioned more to deliver a slightly smaller scale but have a more customized approach. We probably fall more into the latter group than the former, but this is what happens as markets mature. As the market grows, there are different needs and those different needs have to be met. As a consequence, we see this need for customization of cells that truly meet the needs of the customer.  

How confident are you that the automakers based near your plant, Stellantis, Kia, Jaguar Land Rover, will become customers? Is proximity something that is important in this sector?

Proximity really, really matters. Part of the challenge within the industry itself is the very long supply chains that exist. Clearly, there needs to be a significant reduction and compression of that supply chain. It's critical because of the amount of energy that's used, also from a cost perspective so that the battery costs could be reduced. Therefore, InoBat works with all customers to evaluate how it can do that. So, proximity is key, therefore, those manufacturers you mentioned on our doorstep clearly are highly valuable and potential partners for the future. But I wouldn't say that the only place, because if you think about how and where we are based, that Central European location gives us a significant advantage in terms of reaching a number of vehicles. Our estimate is that there are about 2 million vehicles made within a 500 kilometer radius of where we are based. We are very well placed geographically to support Central Europe, but also Germany, France, Austria, Italy and beyond. We see the opportunity to work with a range of different customers to support the shift toward electrification.

One of the biggest challenges for a startup is achieving profitability. When does InoBat aim to get there? Will it take five years or will you need longer?  

We have conducted an extensive financial modeling and simulation around the opportunities in the market and we clearly understand how we can make ourselves profitable. Clearly, these are the macro environmental conditions that will dictate the state of the market. A lot depends on whether you end up being a price maker or a price taker. And that's the same in for the suppluy sector. What's key is our strategy to differentiate around the customization and development of intelligent cells. This gives us some ability to differentiate our pricing and how we drive profitability. Clearly, we will only enter into commercial agreements where there is value that could be created for both sides. Ther are headwinds. There will always be volatility in material pricing, so we have to be able to control what we can control. That is our cost, our labor, taking advantage of Slovakia is a lower cost base, but also how we use our strategy and our differentiation to drive margin and also profitability in our overall cell pricing activities.  

But is there a timeline in mind, such as reaching profitability by 2025 or 2030?  

It's not a figure that any of us want to commit to at this stage. There are so many variables and so many unknowns, both in terms of the external market as well as when we will get financing, how that financing will be used, how big our factory will be, what our uptakes are. Therefore, at this stage, it's very difficult to give a precise answer. What I can tell you is that we are firmly committed to being profitable and providing highly competitive cells to the market that meet the needs of our customers.

Are solid state batteries the next big thing or will lithium ion batteries continue to rule?  

Solid state batteries are still lithium ion batteries, they just have a solid state electrolyte instead of a liquid electrolyte. It's a big technical challenge to make those work. There are a number of players that have been working on them for years. They have conducted a huge amount of research into the development of solid state. The questions are: When will it be ready? And, at what stage is it feasible and economically viable. From our understanding and our own research that isn't immediately around the corner. When it comes to other options, we could also talk about llithium metal, high-silicon anodes, lithium sulfur and more. Overall, we are continually evaluating new technologies.  

Does that mean lithium ion will be around for a while?  

With lithium ion there is still opportunity to "sweat the asset." For the next five-plus years, even out to 2030, lithium ion batteries as we know them will will continue to be the bedrock and the mainstay of the battery industry going forward.