European-American carmaker Stellantis and the world’s biggest battery manufacturer, Chinese CATL, announced on Tuesday the signing of a non-binding Memorandum of Understanding (MoU) for the local supply of LFP battery cells and modules to power Stellantis’ B and C-segment electric vehicles in Europe.

Lithium-iron-phosphate batteries have a long service life and higher thermal stability and are cheaper than the nickel-cobalt-manganese (NCM) batteries used in most premium EVs today. As part of its ‘Dare Forward’ strategic plan, Stellantis hopes to reach a 100% passenger car battery electric vehicle (BEV) sales mix in Europe and 50% in the US by 2030.

Considering joint venture

As part of the MoU, both companies say they are considering forming a joint venture with equivalent contributions. Contemporary Amperex Technology Co. Limited (CATL) is the world’s largest EV battery supplier, with a market share of almost 37% in August 2023.

It has 13 battery factories worldwide, two of them in Europe today. CATL started serial production at its new lithium-ion battery cell plant called ‘CATT’ in Thuringia, Germany, in December 2022. It was the first battery factory of CATL operational outside of China, with an initial manufacturing capacity estimated at 8 Gigawatt hours per year to be beefed up to 14 GWh.

Large BMW order

The European factory’s construction was announced in 2018 after CATL reeled in a significant order from BMW for the following years. Meanwhile, the list of European clients is extended with names like Volkswagen, Daimler, Volvo, and Bosch. And one of CATL’s most prominent clients is still American Tesla (in China).

At the same time, the Chinese are building a second 100 GWh battery plant in Debrecen in the eastern part of Hungary. The foundation stone was laid in April 2023, with serial operations testing starting in 2024 and production beginning in 2025.

Mercedes-Benz prime customer

Mercedes-Benz is one of the big consumers of battery cells and modules to be produced there. Mercedes has an alliance with CATL initiated in 2020 and will be the first to use the cells for its next-generation models made in Germany and Hungary.

For Mercedes-Benz, the deal with CATL is another milestone in reaching a production capacity of more than 200 GWh at eight global production sites by the end of the decade. But the Debrecen factory will also supply BMW, Volkswagen and Stellantis.