Future of electric car defined by struggle over batteries
In the race to the electric car Asia has taken the lead. Will the European or American car industry be able to catch up? Much depends on who will win the battery struggle…
Due to dieselgate and its still growing influence the European car industry, and VW Group especially, has dramatically increased its investments in electrification. At VW this resulted in the so-called MEB platform on which several tens of electric cars will be built (27 are already planned), starting with the VW Neo next year.
The electrical ambitions are big, already in 2025 VW Group expects one third of its sales to be electrified. The problem to build and sell them seems to be a lesser problem than who will deliver the battery. The European manufacturers have a serious backlog.
Battery is key
The demand for batteries will still increase tremendously. Today the battery production is for 86% in South-Asian hands (China, Japan and South-Korea), only 3% of production is based in Europe. This can be a problem because to fulfill its hunger for batteries VW needs 150 GWh on capacity for its projected car production.
Today Volkswagen is buying its batteries from South-Korean manufacturer LG and right now it has no plans to build battery factories itself. That’s a problem, says Max Erich, sector economist at ING. “In Europe they plan production, in China they produce. China is so far in front in the production it won’t be overtaken quickly.”
Tesla as a game changer?
“Quality is crucial in this battery war”, adds Erich. According to him, Tesla is the key player here. In a cooperation with Japanese Panasonic it has already built the gigafactory in Nevada (US) (35 GWh for 800.000 electric cars) but it has also a serious network of superchargers for its own cars. Only the build quality of the cars can be a problem, Erich thinks.
Al Bedwell (LMC Automotive, marketing research) thinks that the Chinese manufacturers will be the fastest, because of the huge local market and the pressure of the Chinese government to go electric.
The European manufacturers have a problem because they are still in a split. “They are the kings of the ICE engine (internal combustion) and want to keep it as long as possible, but they will have to increase their investments in batteries and their production.”
Alarms go off in Europe
German Chancellor, Angela Merkel, is aware of the delay in Europe and has called for a joint effort to close the gap, but the European car industry has reacted partly divided. That doesn’t mean that nothing is happening yet: China’s biggest battery producer, CATL, will build a factory in Germany and a former Tesla employer has begun a huge factory for batteries in Sweden, named Northvolt.
Who is going to win the race? Nobody knows for sure yet. Bedwell and Erich think both that this is extremely difficult to predict. Many producers and countries have now well established strategies. According to Bedwell, the PSA Group and Fiat Chrysler Automotive can have a problem here because of a lack of clear strategy.
VW and Tesla in best shape
According to Max Erich, VW and Tesla seem to be in the best shape at the moment. The key element is that a manufacturer has to be able to produce electric cars on a big scale in 2020 and there both can score.
The first electric car of VW will be the above mentioned Neo, a Golf-sized car that it hopes to sell at a comparable price to a ‘well equipped’ Golf diesel now. The car will be built in Dresden and in Zwickau (both Germany), 1.500 a day in the middle of next year if plans are coming through.