France and Germany power up electric battery alliance

Paris (AFP) –


France and Germany on Thursday unveiled a multibillion-euro alliance to develop next-generation batteries for electric vehicles, hoping to break the grip Asian producers have on a vital component for European carmakers as they shift away from combustion motors.

Speaking in Paris, the French and German finance ministers said five to six billion euros ($5.6 to $6.7 billion) would be invested in the so-called "Airbus for batteries", aimed at replicating the pan-European planemaker's success.

The idea was first floated 18 months ago by EU officials worried about falling behind in the global technology race.

"It's a major step in the long history of our European industry," France's Bruno Le Maire said at a press conference with his German counterpart Peter Altmaier and Maros Sefcovic, the European Commission vice-president in charge of energy.

The investment pledge "shows Europe is not fated to depend on technological imports from the two powers that are the United States and China," Le Maire said.

"Time is running out if we want our own European production in place within four or five years," Sefcovic added.

He said Brussels was prepared to approve 1.2 billion euros in public subsidies for the venture, with the official green light expected by October.

At least four billion euros more would come from the 35 private firms, including top automakers and energy groups, who have signalled their readiness to join the alliance.

"Consortiums are made up of states, they aren't made up of government ministers or the commission," Altmaier said.

A pilot factory with around 200 employees will be opened in the coming months in France, with a goal of opening two production sites, in France and Germany, by 2023 that would generate 1,500 jobs at each.

- High hopes -

European carmakers have been ramping up electric vehicle production after years of scandals over diesel pollution and as tougher rules on cutting carbon emissions come into force.

They mostly buy cost-competitive cells from a handful of foreign manufacturers, mostly in Asia, which they use to build the high-capacity batteries needed to power electric vehicles.

Just last year, China's CATL announced plans for a massive new production factory in central Germany.

So far European automakers have been unwilling to go it alone with the huge investments necessary for developing and building large-scale battery construction at home.

The European Union accounts for just one percent of the global production of lithium-ion cells, according to data from the BCG consulting group.

But the market for electric vehicle batteries is expected reach 45 billion euros by 2027, of which 20 percent to 30 percent will be in Europe, it forecasts.

- 30 percent of global demand -

Le Maire said the new venture would be open to other EU countries, with Italy, Belgium, Poland, Austria and Finland already expressing an interest.

And Altmaier cited French battery specialist Saft, acquired a few years ago by oil giant Total, as well as Europe's second-biggest automaker PSA as likely participants in the venture.

Contacted by AFP, PSA said it was studying the project via its Opel unit.

"No decision has been made at this stage, and it won't be until the European Union makes a firm commitment" on the announced state aid, a spokesman said.

Altmaier has previously said he wants the EU to supply 30 percent of global battery demand by 2030, with "several production sites" in Germany and elsewhere.