Ranking second in the electric vehicle (EV) industry in 2023, European battery companies are downsizing their operations one after another. This is due to the lower-than-expected EV sales and the inability to compete with inexpensive batteries flooding in from South Korea and China.
On July 8, the Financial Times (FT) quoted British battery consulting firm SC Insights and predicted that European battery companies will reduce their production volumes by revising or withdrawing their production plans this year.
The production volume they have given up on this year reaches 158 GWh, enough to produce about 2 million EVs. According to CRU Group, a British raw material market information company, the battery production target set by European battery companies for 2030 is 1280 GWh. This amounts to a quarter of the target of 4413 GWh set by Chinese companies and is similar to the 1262 GWh target set by American companies. However, even these targets are difficult to guarantee achievement.
CRU Group evaluated that there is a very high chance that 50% of the European battery production target will not be produced on time due to delays in factory construction or decreased operation rates. Chinese battery companies, which have been suffering from battery overproduction, are estimated to be able to produce 71% of the planned volume by 2030, which is a better situation than in Europe.
Northvolt, Europe’s largest battery company, had planned to build two battery factories in Sweden with a production volume of 60 GWh and 10 GWh, respectively. However, the company canceled the construction of the 10 GWh factory and delayed the start of the remaining one. Since 2022, CRU Group has analyzed that at least seven battery factory plants in Europe, including Northvolt’s, have been canceled while six have been delayed.
Experts cited sluggish EV sales and lack of price competitiveness as reasons for European battery companies to downsize their production plans. Battery factories are capital-intensive manufacturing businesses, and mass production is essential to lower prices. If the factories cannot sell the mass-produced batteries, expanding production facilities will only increase fixed costs.
According to the International Energy Agency (IEA), about 60% of the EVs sold worldwide in 2023 were sold in China, while 25% and 10% were sold in Europe and the U.S., respectively. However, according to CRU Group, EV sales in Europe increased by only 2.4% from January to May this year compared to the same period last year. Sales in May decreased by 11% compared to a year ago. British consulting firm LMC Automotive lowered its forecast for EV sales in Europe in 2030 by 15% compared to last year.
The FT pointed out that while European companies have been focusing on expensive high-capacity batteries using nickel and cobalt, Chinese companies have improved quality by focusing on cheaper lithium iron phosphate (LFP) batteries. Andy Leyland, Managing Director at SC Insights, said, “Automakers don’t prioritize when ordering batteries.” He explained that if the European government and automakers do not set long-term plans then “Chinese companies will occupy a significant part of the battery industry.”
Meanwhile, the FT pointed out that Korean companies are also penetrating Europe along with Chinese companies. Northvolt signed a $2 billion battery supply contract with Germany’s BMW in 2020 but failed to fulfill it. BMW announced in June that it was canceling the contract and the volume was transferred to Samsung SDI. Northvolt CEO Peter Carlsson mentioned Asian battery companies in his announcement this month, saying, “We can outperform them in performance,” adding, “We have to prove that we can also win in production.” Northvolt announced last week that it is entering a strategic review of future new production investments. Depending on the review results, establishing factories in Germany, Canada, and Sweden may be delayed. On July 1, LG Energy Solution signed a contract to supply 39 GWh of LFP batteries to Renault’s EV division Ampere from 2025 to 2030, which is enough to produce about 590,000 EVs.
