Chinese battery cell manufacturer CATL has decided to increase the investment in its planned factory in Erfurt by a factor of 7.5: Instead of the originally planned 240 million euros, 1.8 billion euros are now earmarked for the German location.
Not out of the blue: European head Matthias Zentgraf had already informed our colleagues at electrive.net in February that the announced capacity of 14 GWh per year for the first expansion stage would not be anywhere near sufficient: “With realistic planning, we assume – calculated at a low level – a demand of 100 GWh in 2025,” Zentgraf said at the time.
CATL explained the Board of Director’s decision saying that it is reassessing the development of its overseas business and the change in market demand. A filing with the Shenzhen Stock Exchange shows that CATL will increase investment in its production, research and development base in Europe to a total of €1.8 billion.
The reasons given are also not surprising “Behind CATL’s move is a surge in Europe’s EV industry, as many renowned German brands like BMW and Volkswagen are shifting their strategies from traditional internal-combustion cars to EVs,” Feng Shiming, Managing Director of Menutor Consulting Shanghai, told the Global Times. “A division of labour with China’s advantage in batteries and Germany’s advantage in car production is the best choice for German companies”.
With the new investment, battery production in the central German city of Erfurt could quickly exceed the size of Tesla’s Gigafactory in Nevada. Tesla boss Elon Musk is also aiming for a long-term capacity of around 100-gigawatt hours with Tesla’s battery factory. From Erfurt, CATL intends to supply customers that include VW, BMW, Daimler, the French PSA group as well as Volvo and Jaguar Land Rover.
For the market chances of battery production by German companies, the plan is a damper if CATL can achieve such large economies of scale in production. Currently, only Volkswagen – CATL’s partner in China – has announced its intention to set up a battery production facility with a capacity of 16 GWh (later 24 GWh) in Salzgitter in cooperation with the Swedish company Northvolt.
Other projects are awaiting the award of the so-called Altmaier billion, with which the Federal Minister for Economic Affairs and Energy wants to promote three consortia. Peter Altmaier would like to supply around 30 per cent of worldwide demand for battery cells from German and European production by 2030. European government and industry leaders are concerned that the European automobile industry may become overly dependent on battery makers from China, South Korea and Japan.