In August 2022, the global installed power battery capacity was 45.7 GWh, up 90.3% year-on-year, according to statistics released by South Korean market research institution SNE Research on October 6. Of the top ten companies, six were from China, including CATL, CALB, Gotion Hi-Tech, Sunwoda and SVOLT, with a total market share of 58.1%. With the production and sales of new energy vehicles in China hitting record highs, Chinese power battery makers are rewriting the competitive pattern of the global battery market.
According to Chinese media outlet DoNews, the European power battery market is becoming much more important. This is closely related to the strong market demand and policy support from the governments. According to the European Automobile Manufacturers’ Association (ACEA), in the first half of 2022, the sales volume of new energy passenger cars in Europe was 1.12 million, up 8.7% year-on-year. Further, policies such as the European Union banning the sale of fuel vehicles by 2035 have greatly promoted the development of new energy vehicles.
Since 2022, many European battery manufacturers, including Northvolt of Sweden and Verkor of France, have improved their production expansion plans. At the same time, Chinese power battery manufacturers also set their sights on the European market. “Many Chinese battery companies are choosing to build factories in Europe, mainly to support vehicle manufacturing in the area. The proximity of the demand and the supply makes it the lowest cost,” according to Jinshu Cai, Vice President of EVE Power Co. Ltd.
In March of this year, EVE Power Co. Ltd. signed a letter of intent with the Debrecen Municipal Government of Hungary, and planned to purchase land to build a battery factory for the production of new large cylindrical batteries. In June, Gotion Hi-Tech’s first power battery production and operation base in Europe landed in Göttingen, Germany. According to the plan, the production and operation bases will be divided into two phases, namely the brownfield plant and the greenfield plant, with an annual production target of 6GWh and 12GWh.
Moreover, in September, Great Wall Motor-backed battery firm SVOLT announced that it will build a battery cell factory for the European market in Brandenburg, Germany, which is also its second overseas factory the firm plans to build after its Saarland plant in the same country. Also in September, CATL signed a pre-purchase agreement with the municipal government of Debrecen to build its second battery factory in Europe. The total investment of the project should not exceed 7.34 billion euros ($7.5 billion) and the planned production capacity should reach 100GWh.
However, Chinese battery manufacturers are also facing greater challenges entering the European market. First of all, the pressure brought by raw materials is still rising. According to the latest data published by Shanghai Ganglian, the average prices of industrial-use lithium carbonate and battery-use lithium carbonate reached 523,000 yuan ($71555.62)/ton and 537,500 yuan/ton respectively, setting a record high. The rise in price of raw materials has led to a significant decline in the gross profit margins of many battery enterprises.
Secondly, the localization of supply chains has also been a big challenge. Importing raw materials from China to Europe bases and dispatching employees to overseas subsidiaries also raise costs. Finally, the design of power battery production processes in the European market is different from that in China, which makes Chinese battery manufacturers constantly trying to improve the manufacture of their products and be familiar with European technical standards and specifications, which subsequently leads to increased costs.
Despite the challenges, the European market is still a key one. The European battery market will still see substantial growth while the pace of Chinese battery manufacturers spreading out into the global market will accelerate once again.