Germany ramps up electric vehicle battery production with big state subsidies

The German government will invest more than €1.5 billion ($A2.4 billion) in battery cell research and production, starting with a €300 million ($A488 million) grant awarded to battery company Varta.

The funding is the first step in a new initiative set up under the European Union’s Important Project of Common European Interest (IPCEI) program. Along with Varta, four other companies with battery-cell projects in Germany will also be receiving grants from the Ministry of Economic Affairs and Energy, including BASF, BMW Group, Opel, and Umicore.

With a potential market value for European-made batteries of €250 billion by mid-2020s, according to the European Battery Alliance, and with lithium-ion batteries already accounting for approximately 40% of the value creation of electric vehicles, the German Government’s support for battery-cell projects could yield significant gains for the whole country.

Projects intended to be underwritten by the Government’s new funding initiative are expected to begin making batteries in 2022 and enter industrial-scale production by the middle of the decade at the latest.

“We are igniting the next step in battery cell production in Germany,” said federal minister of economics Peter Altmaier.

“The first battery components are already being produced in Germany. Now we are taking the next step towards mass production of battery cells for automotive and industrial applications. This is how we bring about the energy and traffic transition ahead.

“It is important to me that the CO2 balance of batteries improves and that we use raw materials more economically. Because we want the most innovative and sustainable batteries to be manufactured in Germany and Europe.

“I therefore rely on an intelligent and efficient interaction of battery research, innovation and recycling. This brings innovative value chains and qualified jobs to Germany and Europe.”

Germany is currently aiming at delivering 7 to 10 million electric vehicles to its roads by 2030, and government-backed incentives of up to €9,000 are available to those who purchase new EVs or hybrid vehicles.

Such support provides long-term stability for the growing EV market which, in turn, opens up business opportunities for German subsidiaries of foreign companies looking to expand their operations.

This is being matched by a trend for battery manufacturing to move domestically, rather than relying on international imports, according to Germany Trade & Invest (GTAI) automotive expert Stefan Di Bitonto.

“It’s obvious right now that battery manufacturers are moving closer to their customer base,” Di Bitonto said.

“Germany is the heart of the European automotive industry, and we’re seeing increased volume in investments in this area in various German regional states: most prominently CATL in Thuringia, Northvolt in Lower Saxony, Farasis in Saxony-Anhalt and most recently Tesla in Brandenburg.

“We believe that in the future, German automotive production will primarily get the batteries for its electric vehicles directly from Germany.”

“By expanding to Germany, companies active in the value chain in this area can profit from this development and take part in a revolutionary change, influence things to come and position themselves advantageously for the mobility of the future.”