Chinese ev battery industry chain layout in Europe

At present, China’s lithium battery industry has already focused on the European layout and actively promoted the construction of battery production bases.

Ev battery industry chain in Europe

In terms of batteries, CATL already has local production and supply capabilities in Europe. Its factory in Thuringia, Germany has successfully achieved mass production of lithium-ion battery cells, and its second European factory project in Hungary has also officially started.

In addition, CALB, SVOLT, Gotion High-tech, Envision AESC, EVE, Farasis and other Chinese battery companies have already planned and deployed production bases in Europe.

As for the material side, Putailai recently announced plans to build a 100,000-ton integrated production and R&D base for lithium-ion anode materials in Sweden; the electrolyte project of CAPCHEM in Poland has obtained all the pre-licensing required for production, and is steadily developing.

Entering the trial production stage; the lithium-ion diaphragm factory project established by SEMCORP and SENIOR in Europe is also progressing smoothly.

Why should the ev battery industry chain be deployed in Europe?

Europe has always been one of the most critical export destinations for Chinese lithium battery companies.

Under the background of achieving carbon neutrality by 2050, the policies of European countries to encourage the production and consumption of electric vehicles have greatly promoted the market demand for power batteries.

Europe is the second largest EV market after China. The data shows that the penetration rate of electric vehicles in Europe in 2022 is 21%, second only to China. According to forecasts, the penetration rate of electric vehicles in Europe will reach 39% in 2025.

Behind the market demand is the capacity gap of power batteries.

According to data forecasts, by 2023, the demand for electric vehicle batteries in Europe is expected to reach 406GWh, while the supply of power batteries is expected to be 335GWh, and there is an obvious shortage in the market. It is expected that by 2025, the supply gap will further widen to around 40%.

Due to late start and strategic mistakes, Europe has missed the opportunity to build a complete power battery industry. This is both an opportunity and a challenge for China’s power battery industry chain enterprises.

In a short time, it is still difficult for Europe to get rid of its dependence on the Asian lithium battery industry.

Chinese lithium battery manufacturers setting up factories in Europe will undoubtedly, on the basis of local resource advantages, effectively meet the supply chain management and order needs of upstream and downstream customers, and increase global production capacity.

Germany and Hungary have become the main locations

Many Chinese companies have chosen two countries for their layout and construction of factories – Germany and Hungary. This stems from the profound automobile industry foundation and convenient transportation conditions of the two countries.

Germany is the largest car market in Europe, and also the largest electric car market, with well-known car companies such as Volkswagen and BMW. In 2022, Germany’s annual electric vehicles accounted for 25% of new car production. In December last year, sales of electric vehicles surpassed that of conventional gasoline vehicles.

Hungary is the “back garden” of the German automobile manufacturing industry. The city of Debrecen, where companies such as CATL and EVE have chosen to purchase land, is the most developed industrial city in Hungary.

It has gathered world-renowned multinational companies such as Continental Group and BMW Group, as well as a large number of small and medium-sized suppliers in the automotive industry chain.

Geographically, Hungary is an important transportation hub in Central and Eastern Europe. It is directly adjacent to 7 countries, counting indirect neighbors, including most of the European countries.

Investments in the automotive industry in Hungary are currently dominated by three countries: Germany, China and South Korea. Over the past decade, Hungary has provided 31 cash grants for major investments in its auto and battery industries, 29 of which went to companies from the three countries, an analysis of the data showed.

The Hungarian auto industry has also benefited from this, with output increasing three and a half times in ten years to over HUF 12,000 billion (EUR 32.3 billion) last year, an annual growth rate of 31%. 90% of the Hungarian auto industry is exported to 173 countries around the world.

Hungary has received more than 14 billion euros of foreign direct investment in its battery industry alone over the past six years, according to government figures.

Currently, Hungary aims to become the center of battery manufacturing in Europe. Cost advantages, state subsidies and proximity to automaker factories have made Hungary increasingly attractive to battery producers.

Challenges of Chinese ev in Europe

It is encouraging for Chinese power battery companies to accelerate their expansion into the European market. However, Chinese electric vehicles may encounter challenges in the European market:

First, the European market focuses on controlling the cross-border circulation of user information and data. Excessive and unrestrained access to user information will be closely controlled by EU regulators.

Chinese car companies entering the European market will face strict cybersecurity compliance regulatory requirements and high compliance thresholds, such as cybersecurity compliance access certification for vehicle products.

Second, the EU is about to completely ban the sale of gasoline and diesel vehicles. To a certain extent, it will intensify the competition between European car companies and Chinese car companies in the field of electric vehicles, which is not entirely conducive to the sales of electric vehicles in China.

Third, as the birthplace of the automobile industry, European automobile brands have a long history and strong strength. Consumers in the European auto market are highly loyal to local brands such as Volkswagen, BMW and Mercedes, and foreign brands that lack popularity often face huge resistance.

Suggestions for the development of Chinese ev companies in Europe

Industry insiders believe that Chinese car companies can make efforts in the following three aspects to gradually gain recognition from the European industry and consumers.

First, Chinese car companies need to be equipped with data protection experts who are proficient in multiple jurisdictions. Clarify minimum requirements and maximum standards, and flexibly design your own data processing system.

Second, if Chinese electric vehicles want to be recognized by the European market, they need to do a good job in the local after-sales and supply chain links. For example, after-sales service in various aspects such as the supplement of battery swapping, parts maintenance, and battery technology.

In addition, the speed of European infrastructure layout and other work will be slightly slower than that of China, and Chinese car companies must adapt to this operating rhythm.

Third, Chinese automakers can leverage their strengths in digitalization and focus on providing customers with a digital experience. This dimension presents a good opportunity to compensate for its competitive disadvantages in engines, transmissions, branding and design.

At the same time, it can help it provide tailor-made products for European users, gradually accumulate a good reputation, and achieve new breakthroughs in the global market.