China's CATL Aims to Build a EV Battery Plant in Germany 3 Times Bigger Than Tesla's Gigafactory
As German automakers shift towards building more electric cars, they face a daunting problem, sourcing a steady supply of EV battery cells. At the moment, Germany does not have a factory, or the raw materials, to meet the projected high demand for battery cells. The shortage is forcing German automakers to rely heavily on Asia and South Korean suppliers, including China's Contemporary Amperex Technology Ltd. (CATL).
CATL is the world's largest maker of battery cells for electric vehicles, has already committed to building a factory in Germany, but now the battery maker plans to increase the size of its factory in Erfurt to meet rising demand from Germany's auto industry.
According to Handelsblatt Today, CATL is looking to increase annual capacity far beyond its original target, said Matthias Zentgraf, CATL's head of Europe, said at an automotive conference in Bochum.
"We want to build 14 gigawatt hours in a first step and now estimate that we could be in the three-digit gigawatt area from 2026 at the latest." said Zentgraf.
That would make the German battery factory even bigger than Tesla's Gigafactory, which currently makes battery cells with a total capacity of 20 gigawatt hours. Tesla's Nevada battery factory, which is jointly operated with Panasonic, is expected to eventually increase annual output to 35 GWh.
CATL is eyeing European expansion because it expects huge growth in the European electric vehicle market in response to the EU's strict CO2 requirements and the banning diesel engine vehicles from some cities.
"A lot happened last year. The new CO2 targets will lead to a faster rise in demand than we had thought," Zentgraf told Handelsblatt.
Zentgraf said the fact that Germany's first battery-cell factory was being built by a Chinese company was simply the result of a German business sector "that didn't dare to do it."
Major OEM supplier Bosch, the world's largest automotive parts supplier, planned to build an EV battery factory in Germany, but abandoned it plans citing high investment costs.
Fleet-average CO2 emissions from new cars are to be cut by 37.5 percent by 2030 compared to levels in 2021, a limit that looks unattainable without battery-powered vehicles making up a large percentage of vehicles on the road.
As a result, VW, BMW and Daimler plan a major rollout of new electric models. However, this effort requires access to a reliable supply of battery cells.
German automakers have already committed billions of euros to purchase battery cells from CATL.
BMW plans to source €4 billion ($4.6 billion) of battery cells from CATL over the next few years. While Volkswagen awarded contracts last year for EV batteries worth €48 billion (US$54 billion) from CATL, as well as South Korean manufacturers LG Chem and Samsung SDI.
CATL is already looking out for further possible locations in Europe. The company is exploring whether it can expand upon its 70-hectare site in Erfurt.
"But if that shouldn't be enough we're taking a look around right now," said Zentgraf. In Erfurt, CATL plans to break ground on the project this spring. Battery production is scheduled to begin in 2021.
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