BMW Sign a $4.7 Billion Contract with China’s CATL for Battery Cells: CATL Will Build its First European EV Battery Factory in Germany
BMW plans to source 4 billion euros’ ($4.7 billion) worth of battery cells from Chinese battery maker Contemporary Amperex Technology Ltd (CATL) over the next few years, the carmaker’s purchasing boss said on Monday. The deal will allow China’s biggest lithium battery maker to build a factory to produce cells for electric cars in Europe, BMW spokesman Glenn Schmidt said.
The long-term contract sees 1.5 billion euros’ worth of battery cells coming from a new CATL plant in Erfurt, in the eastern German state of Thuringia, Markus Duesmann said in Munich. The rest will come from China. A contract for the construction of the new plant is due to be signed on Monday during a visit to Germany by China’s Premier Li Keqiang.
CATL is now banking on a state-led Chinese drive to curb pollution from traditional combustion engines and increase the country’s presence in the overseas new energy vehicle (NEV) market. It made its debut on the Shenzhen stock exchange earlier this month and aims to use the proceeds to finance its 24 gigawatt-hour (GWh) capacity expansion.
Based in Fujian province, it sold 11.85 GWh of lithium batteries last year, the highest in the world. It also aims to expand into downstream car production and was listed as a “sizeable investor” in a $500 million fundraising for Chinese NEV start-up Byton.
China’s biggest NEV producer, BYD, this week announced the launch of what will become the world’s biggest lithium battery plant and aims to raise its own battery production to 60 GWh a year by 2020.
China accounted for more than half of global new energy vehicle ownership last year, and sales rose 141.6 percent in the first five months of 2018, hitting 328,000 units. As part of its efforts to increase its global reach, China is also trying to take the lead when it comes to the standardization of battery technologies and designs. CATL’s cooperation with BMW this time is also considered by many as one step further towards its goal.
CATL, the world’s largest maker of battery cells for electric vehicles, said the new factory was just its first step in Europe. It is also exploring other locations in Poland and at least one other country in Europe, sources told Bloomberg. “We want to supply all the OEMs (manufacturers) in Europe,” Chairman Robin Zeng said. “If the Thuringia project is successful then we can consider other locations.”
The new CATL factory in Thuringia will create about 600 jobs and reach production of 14-gigawatt hours (GWh) by 2022. CATL reached shipments of 12 GWh in 2017.
There have been warnings that Europe’s lack of its own production capabilities for the cells that power electric cars could leave its car industry exposed and too reliant on others. EU Energy Commissioner Maros Sefcovic has been pounding the drum for a European producer, complaining that Europe cannot be dependent on manufacturers in China and South Korea.
However, many European auto-parts makers have been reluctant to allocate the significant funds needed to challenge dominant Asian producers Samsung SDI, LG Chem, and Panasonic. Robert Bosch decided earlier this year against making battery cells, citing costs exceeding 20 billion euros ($23.5 billion).
Mr. Krüger said a European producer would make sense if it was competitive, but for now, BMW needs a supplier “who is already there.” The automaker has said in the past that its top priority for batteries is a supplier who was nearby, so the agreement by CATL to build a huge factory in Germany satisfied that criterion. And they “welcome the decision of CATL to manufacture in Germany and are in talks regarding this,” a spokesman said.
Duesmann said BMW had also invested in some of the costs for the CATL factory in Erfurt but declined to say how much.
Parallel to the purchase from CATL, BMW is investing €200 million in its own battery research in Munich. A late entry into the murderous lithium-ion market would result in the same fate that overtook solar panel producers when those became a commodity. The focus of research, therefore, is on the high-density batteries that would significantly increase the range for electric engines. VW, for instance, has invested hundreds of millions in the US firm QuantumScape to help reach that breakthrough. But the earliest production would be in 2025, forcing the German carmakers, for now, to rely on the Asian producers.
Source from: Reuters