‘Burning Money’ or Seizing the Future? Inside Germany’s Bid to Beat China at Building Batteries
Date: Apr 08, 2019
The German government has placed a big bet on batteries as a key to the country’s industrial future. The automotive industry is vital to the German economy, and cars are going electric. So, the thinking goes, Europe—and Germany in particular—should be making more electric car batteries.
It’s certainly a booming industry; electric car battery sales are projected to hit $60 billion by 2030. But the companies making the batteries are overwhelmingly Asian. Most are Chinese firms such as Contemporary Amperex Technology Co. Limited (CATL) and Build Your Dreams (BYD), whose rise was fostered by state subsidies for Chinese electric carmakers and which are likely to hold 70% of the market in a couple years’ time. There are also big Japanese and South Korean players such as Panasonic (Tesla and Toyota’s battery partner,) LG Chem and Samsung SDI.
Germany wants some of that action. Last November, the government announced a €1 billion ($1.12 billion) fund for German companies to develop and build battery cells. Germany’s “National Industrial Strategy 2030,” unveiled in February, fretted that “if the digital platform for autonomous driving with Artificial Intelligence were to come from the USA and the battery from Asia for the cars of the future, Germany and Europe would lose over 50% of value added in this area.” The solution? State assistance for battery cell production.
But not everyone is convinced this approach makes sense, to put it mildly. “It’s burning taxpayers’ money,” said Ferdinand Dudenhöffer, professor of automotive economics at the University of Duisberg-Essen and a veteran of car firms such as Opel and Porsche. “It’s stupid. It’s crazy, what our ministry of economics is doing.”
According to Dudenhöffer, the government is looking for value in the wrong place, as the money is really in the main battery components: cathodes and anodes. “The production value of the cell is about 15%. Sixty percent is just in the materials of cathode, and another 20% is the materials of anodes,” he said. “The value does not exist in the manufacturing process in which they want to spend €1 billion. The value is in the materials.”
