L R AS Published on Tuesday 16 May 2023 - n° 445 - Categories:PV Watch
A look at the announcement of two new battery production units in France
Mr Macron was particularly pleased to be able to announce the installation of two battery production units in the North of France. He was even beaming.
These two new units are in addition to all those that have announced their arrival in Europe. In February 2022, there were already 35 of them. The number has grown since then. Their long-term survival depends on the agreement with one or more electric vehicle manufacturers and on the supply of raw materials. This rush of battery manufacturers into the European market will considerably increase the demand for components and metals. Two questions therefore arise: will there be enough supply to satisfy the purchases of these factories? And secondly, will the price of these batteries be sufficiently reduced for buyers to be tempted by electric vehicles?
Five battery factories to be operational in France by 2025Summary: Mr Macron has just decided two new companies to invest in France
In February 2022, 35 battery gigafactories were already announced in EuropeIn February 2022, 35 gigafactories of batteries were already announced in Europe: because of the importance of the European market, the Asians are particularly present in building production plants.
To exist, these gigafactories must find buyers This is the condition for their decision to invest
Supplies are likely to be the bottleneck for the factories because they will all be ordering at the same timeThe acquisition of raw materials is the other problem to be solved in order to produce. Shortages of certain raw materials have already been noted, even before the 35 gigafactories identified are operational.
Five battery factories will be operational in France by 2025
Emmanuel Macron has launched a counter-offensive to the extension of the contribution period to take a full pension. He has chosen to focus on foreign investment in France. In 2022, during his previous offensive, he had collected 10 billion euros in investment promises. On the eve of the 2023 meeting, he is making a point of obtaining 13 billion euros in announcements. To show that these are real investments, and moreover in green industries, he announced the creation of a lithium battery production unit in Dunkirk, from the Chinese XTC and the French Orano. A complementary unit to the previous one, that of Taiwanese ProLogium, will be located nearby and will supply batteries for electric vehicles
These new plants, which will come on stream in 2025, will follow three others that are already in operation. In the Nord-Pas de Calais region, the one built by ACC (Stellantis, TotalEnergies, Mercédès Benz) will open shortly in Douvrin (near Lens).
The second factory, that of the Sino-Japanese group AESC-Envision should produce batteries for Renault in Douai within two years. Finally, the third factory, that of the French company Verkor, is due to start production in Dunkirk from mid-2025, also with Renault as its main customer.
Clearly, France will not be short of batteries for electric vehicles if all these factories are put into operation!
The presence of Chinese, Japanese and Taiwanese companies indicates that international groups want to be present in Europe, where the emphasis is on electric vehicles.
In February 2022, 35 gigafactories of batteries were already announced
However, each country, and Germany in particular, is also seeing several battery manufacturers announcing new factories or even having already started up their factory. We are more in a race to be present, to collect public benefits, than in a long-term presence because the competition is likely to be ruthless and there will be many drop-outs. However, it is the international groups that will be able to cope better because they have their rear base in their country of origin, which will enable them to resist the pressure on prices that will inevitably emerge very quickly.
Indeed, in February 2022, it was estimated that Europe would host 35 gigafactories by 2035 (see the two maps at the end of this text). At the beginning of 2022, all European countries will have at least one battery production plant. Germany will have thirteen production units!
In July 2021, PV Magazine reported that there were six gigafactories operational in the EU, which was equivalent to a total li-ion cell production capacity of 62 GWh. At the time, it was estimated that 25 plants would be operational with a capacity of 591 GWh of capacity by 2025. Since February 2022 when the article was written, many companies have announced their desire to build new plants. For example, China's Svolt wants to reach 50 GWh by the end of 2023 and plans to build five production units. The world's number 1, CATL, plans to build a second 100 GWh plant in Hungary...
To exist, these gigafactories must find buyers
What matters is not the number of plants but how these plants fit into the economy, i.e. who the customers are (sales to car manufacturers) and how these plants are supplied.
The customersThere are not too many problems when there are sales agreements with Renault, Peugeot, BMW or Mercedes Benz... However, the demand for electric vehicles must be sufficiently strong to absorb this battery production. Indeed, the mileage achieved with a battery charge would have to be considerably increased (this mileage and the price of the vehicle are the two main obstacles to the purchase of a private individual).
Supplies are likely to be the bottleneck for factories as they will all be ordering at the same time
The supply of components and especially raw materials, on the other hand, is at least a constant concern for factories. The shortage of semiconductors and raw materials drove up the price of batteries in 2022. The first significant deficits appeared for nickel in 2021. Deficits of up to 50% for cobalt, copper, lithium and graphite are expected in 2023 and 2024. As a result, BloombergNEF's late 2022 battery price survey predicts that lithium-ion cell prices will rise this year, after decades of declining prices. Factories rely on recycling, although this is still small for batteries, and on orders from mining companies for their supplies. The latter are opening new mines, but it will take many years before the mines can produce at full capacity.
Thus, at the end of 2022, there was a rise in the price of batteries, reversing the previous trend of reducing the price of batteries each year. The reason for this rise is the increase in the cost of materials, particularly cobalt, nickel and lithium. Although the price of nickel and cobalt has fallen in recent months, and lithium may be on the verge of a downturn, each is still higher than in previous years.
The average battery price would have been even higher without the switch to cheaper lithium iron phosphate (LFP) batteries, which contain no nickel and no cobalt.
The fall in raw material prices at the beginning of 2023 could restore interest in electric vehicles, provided that not all factories place orders. However, not ordering means running the risk of a price spike when supplies are needed, and thus preventing the factory from achieving a reasonable production cost and thus being competitive.
Yet BloombergNEF is clear (as of December 2022): "Battery prices must fall further for more of the average market to go electric this decade. This goal is certainly still achievable, but it will require much greater investment in all areas of the battery supply chain, as well as in R&D and manufacturing process improvements."
Thus, there are two forces pushing for a halt to petrol vehicle sales, on the one hand the environmentalists who are driving the various European Commission deOn the one hand, there are the environmentalists, who are driving the various decisions of the European Commission to ban the sale of internal combustion vehicles in the future (first 2025, then 2030, now 2035). On the other hand, there is the will of manufacturers to be present at the emergence of a huge need. However, both of these forces are hampered by the scarcity of raw materials (for the time being), the difficulty of developing alternative battery technologies that allow for greater travel range, and the need to improve electric vehicles.
If we were to make a prognosis, of the five gigafactory construction projects currently announced in France, at least two and perhaps three will no longer exist in five to seven years' time, as the battle will be so merciless and the Europeans are starting with a handicap, that of their domestic market: Despite their will, they will be limited to Europe, whereas the Asians will benefit from the European market and their national market. Because of this difference, the European candidates start with a considerable handicap. This is not a good thing, but it is a reality. But Mr Macron does not say so.
below the cell production units
below the battery production units