Setting The Stage For A European Battery Cell Market

November 5, 2018 | What does a technology-smart battery policy look like? It’s something the European Commission should carefully consider, says Martin Beuse, Tobias Schmidt, and Vanessa Wood. The three authors, all affiliated with ETH Zurich, published their perspective in Science (DOI: 10.1126/science.aau2516).

The European automotive industry is among the largest in the world, and yet Europe houses less than 1% of the global Li-ion battery cell manufacturing capacity, the authors write. And it’s not because Europe is an unattractive geography. The authors highlight recent announcements by East Asian firms to build gigafactories in Europe. Europe boasts strong research facilities upstream of cell manufacturing as well as a strong automaking industry downstream. Battery cell manufacturing could and should be localized, they argue, for a competitive advantage.

But the European automotive industry isn’t yet invested in large-scale battery cell manufacturing, and the authors believe the European automotive industry is missing a crucial opportunity.

The key question, they argue, is whether the battery cell is a commodity or a core component of strategic value to the automotive industry. If a commodity, then it makes sense that nearly all battery cells are produced by Chinese, Japanese, and Korean manufacturers. But if the battery cell is a strategic component, then it’s time for the automotive industry to take ownership.

Battery cells are complex, the authors argue, involving multiple trade-offs between cost, cycle life, materials, power requirements, and more. “To manage these trade-offs and make smart design decisions, close interaction between the cell manufacturer and automaker is important,” the authors write. “Given the cell’s centrality, dynamic development, and complexity, policies that aim at localizing cell manufacturing industry can thus result in a competitive advantage.”

And the time is now, they continue. The research and development landscape is dynamic. Entering the market will be challenging. Current players have assets as well as accumulated, tacit knowledge and long-term supplier partnerships. But the authors believe now is the time to get started because, “several future developments already on the horizon (e.g., high-voltage cathodes, high-capacity anodes, and solid electrolytes) that will evolve sequentially.”

In order for European automakers to establish a thriving battery cell industry, companies need to begin now acquiring tacit knowledge in both manufacturing and product design, and the authors recommend that the European Union adopt policies to encourage development of the industry, particularly emphasizing two components: collaboration and market development.

Gaining the expertise to build a successful battery cell market will require collaboration, the authors write, particularly with non-European companies who currently hold the tacit battery cell expertise. “Incentives should… be available for research consortia that include non-European companies,” they write. “This can be backed up with measures to educate engineers and to secure access to raw materials and capital.”

Even if a European player were to acquire an existing factory, securing the manufacturing components, collaborations are still needed. “It is not sufficient to focus on individual parts of the value chain, as most tacit knowledge is gained from interactions across the value chain,” the authors argue.

The second focus of the EU should be on developing a consistent European electric vehicle policy to attract a healthy EV market, they write. A healthy market will make collaborations and knowledge-sharing advantageous for current, East Asian battery cell manufacturers, and will provide planning security for European firms, they argue.

The current national EV targets miss the opportunity to leverage the massive size of EU’s common car market, the authors write. “We therefore recommend an ambitious yet realistic EU-wide EV target. One option would be to mandate a certain market share of EVs or even completely phase out internal combustion engine cars, as China has done.” If that plan is, perhaps, a political hard sell, they suggest at least increasing the stringency of the EU’s emissions standard to force a larger share of EVs.

“Only once the European industry has started to catch up should the EU consider incentivizing differentiation of European cells through novel chemistry, manufacturing approaches, or design,” the authors argue. First priority should be establishing the market.