Can Europe make batteries without China? It’s a question that plagues the continent’s policy makers — and a premise that many European climate techs have used to raise their billions.
China supplies over 80% of the world’s lithium-ion batteries, and almost all of the global supply of anodes, a key battery component. Many of Europe’s best-funded climate techs — including Sweden’s Northvolt — are built on the premise of alleviating that dominance.
But — while Brussels limbers up to pile tariffs on EVs from China — some earlier-stage climate tech founders say Europe needs to embrace and work with Chinese partners.
Mitigate risk by working with China?
Elinor Batteries was founded in 2023 and plans to build a gigafactory in Norway to produce energy storage batteries.
After watching older European battery manufacturers struggle to set up their factories, Elinor decided to partner with a Chinese company, Morlus Technology.
“A lot of European battery initiatives are struggling to actually get to series production, so we figured out that we wanted to mitigate the risk,” CEO Arne Fredrik Lånke tells Sifted. Morlus’ founder, Shen Xi, previously led battery design and construction for BYD, the Chinese company which overtook Tesla as the world’s top EV seller this year.
Through the partnership, Morlus will help Elinor to build the factory itself. Elinor will also license Morlus’ battery tech for the cells it produces.
While Elinor’s gigafactory is under construction, it plans to supply its customers with cells produced at Morlus’ site in China. “When we see that the customers are actually going to be willing to pay what it costs to produce in Europe, we will. Until then, we want to source our products from China,” Lånke says.
“It’s really important for us to move fast in the battery space, and in doing that, you can’t avoid working closely with China the way things are right now,” he says.
In Lånke’s view, working with Chinese expertise to build up battery production in Europe will trigger a components supply chain to establish itself on the continent, making it easier for domestic production to locally source components in the future.
Elinor is not alone in its partnership with China. Although marketed on the premise of removing European reliance on China, Swedish gigafactory maker Northvolt used Chinese machinery in its factory.
Likewise, UK climate tech Field, which deploys energy storage systems, recently signed an agreement with China’s Envision Energy, to supply hardware and equipment.
Norwegian battery startup Beyonder is also working with China. The company told Sifted it “has access” to 2.4Gwh of production capacity per year in China. “Our long term strategy is to have production capacity in Europe – when we have financial strengths to carry such investment,” Beyonder CEO Tove Ljungquist told Sifted.
“Graphite is already game over”
Elsewhere in the climate tech world, others remain convinced that Europe needs to go it alone to shore up its battery supply chain.
Rob Anstey, is founder of GDI, an American company which is building a silicon anode plant in Germany, funded by the European Investment Bank (EIB).
In his view, the extent of China’s battery plans is yet to be realised by the rest of the world. “China is going to vertically integrate the entire industry and eventually they will probably stop selling batteries and only selling vehicles,” he says. Should Europe fail to set up its battery production and that were to happen, the continent would then have to buy actual vehicles directly from China.
Competing with China on existing battery composition is futile, Anstey says, meaning European production needs to switch to forms of battery that Chinese companies are yet to dominate. For GDI, that means replacing graphite anodes with silicon ones.
“Graphite is already game over. They have the lowest cost of production and 93% of the volume,” Anstey says. “No one can build a plant and come anywhere near their selling price, therefore they cannot finance a factory. Therefore we have to go to silicon because they have not dominated that market yet.”
Upping tariffs
There’s one thing founders seem to agree on: the need for policy that incentivises European production.
“We need to see customers requiring the batteries to come from Europe,” says Elinor’s Lånke. “If the customers are going to do that, then there needs to be incentives for them to do so, and that needs to come from the politicians.”
That wish looks to be in the works in one area at least: next week, the European Union is set to impose increased tariffs — up to 35.3% — on electric vehicles built in China.
Read the orginal article: https://sifted.eu/articles/european-climate-tech-china/
