Focus: After Northvolt, Europe's battery hopes rely heavily on China
20/12/2024 09:00
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Northvolt's collapse was a blow to Europe's battery
industry
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Future growth may depend on Chinese investment and
know-how
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Joint ventures with Chinese battery makers could become
the norm
By Nick Carey
VODERADY, Slovakia, Dec 20 (Reuters) - Northvolt's
financial collapse has not entirely crushed Europe's dream of
developing its own electric vehicle batteries but fulfilling it
is likely to require Chinese cash and expertise.
InoBat CEO Marian Bocek's Slovakian start-up had to work
hard to secure funding until China's fifth-largest battery maker
Gotion 002074.SZ bought a 25% stake last year and formed a
joint venture with InoBat to build European gigafactories.
On Friday, InoBat announced 100 million euros ($104 million)
in Series C funding, taking its total raised to well over 400
million euros.
Coming just weeks after Northvolt's downfall, the investment
shows European EV battery projects can still raise money.
But instead of an independent European industry, the norm in
future may be joint ventures that likewise rely on China's
low-margin EV battery dominance, according to interviews with a
dozen executives, investors and analysts.
They cited the Gotion-InoBat Batteries (GIB) tie-up and a
deal announced last week between Stellantis STLAM.MI and CATL
300750.SZ .
Battery startups are "just not the flavour of the month,"
said Lacie Midgely, a research analyst at UK investment bank
Panmure Liberum. "Institutional investors are looking for
strategic investors before they'll get on board."
In 2023, Hefei-based Gotion had around 150 gigawatt hours
(GWh) of nominal battery capacity, enough to produce batteries
for between 1.5 million and 2 million cars.
Morningstar analyst Vincent Sun forecasts it should hit 270
GWh in 2025 - dwarfing Europe's current capacity.
"It made a big difference that InoBat has a partner like
Gotion on board," said Vikram Gourineni, executive director at
Indian battery maker Amara Raja AMAR.NS , a lead investor in
InoBat's Series C round. Amara Raja also participated in
InoBat's Series B round and has signed a licensing deal for GIB
battery technology.
Gourineni said high-profile failures by start-ups like
Northvolt and Britishvolt have left automakers demanding proven
scale "because they don't want to risk their EV programmes".
InoBat has a pilot production line making high-performance
EV batteries in Voderady, near Bratislava, and will also be
Gotion's "European face" for larger gigafactories, Bocek said.
"Investors look at us and see our big brother (Gotion) will
ensure our cells get produced," Bocek told Reuters.
MAJOR BLOW
Sweden's Northvolt raised more than $10 billion but failed
in its plans to mass-produce EV batteries and compete with
China's experienced and deep-pocketed BYD 002594.SZ and CATL
300750.SZ .
That has left investors questioning other battery projects
as the energy transition proceeds more slowly than expected.
At least eight companies have postponed or abandoned
European EV battery projects this year, including joint venture
ACC, led by Stellantis and Mercedes-Benz MBGn.DE .
Europe's battery pipeline capacity out to 2030 has fallen by
176 GWh in 2024, according to data firm Benchmark Minerals.
But other projects are slowly gearing up.
France's Verkor, backed by customer Renault RENA.PA , has
secured around 3 billion euros for a 16 GWh gigafactory in
Dunkirk that will produce batteries for 300,000 EVs annually
when completed around 2028.
Verkor must show it can deliver to Renault before a
"significant number" of potential automaker customers sign up,
CEO Benoit Lemaignan said, adding: "They are happy to interact
with us, but they want to see the product first."
Britain's Ilika IKA.L will provide test EV battery cells
in 2025 to 17 automakers and battery makers, including Tata
Motors TAMO.NS unit Agratas.
Rather than building a gigafactory, Ilika wants licensing
agreements to mass-produce its solid-state batteries, CEO Graeme
Purdy told investors during an early December tour of its pilot
production line. It already has such a deal with U.S. firm
Cirtec Medical, which will start producing tiny batteries for
medical devices next year.
Michael Rae, a clean-tech fund manager at M&G who was on the
tour, said Ilika currently falls below his fund's market cap
threshold but could become an investment candidate.
Battery makers like Ilika must still win major automotive
customers, he said, requiring a "totally different skillset".
MOVE FASTER
Gotion's expertise helps InoBat solve problems, said CEO
Bocek, adding: "This helps us move faster and conserve cash."
He said high-performance European automakers including
Ferrari RACE.MI are currently testing InoBat's energy-dense
batteries, to be made at the low-volume, high-margin 4 GWh
gigafactory the company is building in Voderady.
The GIB joint venture is meanwhile focused on high-volume,
lower-margin production leveraging Slovakia's position as
Europe's fourth-largest car producer and its proximity to
German, Czech and Hungarian auto plants.
GIB plans a $1.2 billion 20 GWh gigafactory in Surany,
Slovakia to provide batteries for 200,000 EVs annually from 2027
for Volkswagen, which owns 24.45% of Gotion. InoBat's portion is
part-funded by Slovak government aid of 214 million euros.
Bocek said automaker interest in an additional, planned 20
GWh production line at Surany has grown, particularly since
Northvolt ran into trouble.
Andy Leyland, co-founder of supply chain specialist SC
Insights, said investors and automakers want to "de-risk
production".
"The Chinese have mastered low-cost mass production, so if
you want batteries made, most likely Asian battery makers will
make them," he said.
($1 = 0.9619 euros)
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FACTBOX Companies investing in EV battery factories in Europe
urn:newsml:reuters.com:*:nL1N3NB0BP
MAP Europe's downsized gigafactory network https://reut.rs/4fpIpvZ
MAP Europe's downsized gigafactory network (interactive) https://reut.rs/4eyoSbB
Volkswagen has taken major writedown on Northvolt stake, sources
say urn:newsml:reuters.com:*:nL2N3MW0FT
Northvolt crisis may be make or break for Europe's EV battery
ambitions urn:newsml:reuters.com:*:nL1N3MT0KB
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(Editing by Josephine Mason and Catherine Evans)
((nick.carey@thomsonreuters.com; +44 7385 414 954;))