Tesla Provider CATL Thinks Of Third Battery Factory In Europe, But There Are Doubts

The world's largest battery manufacturer – a key Tesla provider - continues to maintain Europe as one of the main markets for its products. The Chinese manufacturer is evaluating the possibility of a new center, but there are some serious doubts.

So far this year, CATL has further expanded its lead as the world's leading producer of batteries for electric cars. The hegemony of the Chinese manufacturer has reached almost a 35% market share in the first half of the year 2022; a success based on strong investments and an increasingly extensive manufacturing network worldwide. Europe is one of its most important markets, and faced with the prospect of other important rivals getting ahead of them, CATL is seriously considering opening a new battery factory in the old continent, which would be its third; though there are some serious doubts about it.

All of this comes before Contemporary Amperex Technology Co. Ltd. has even started construction work on its second factory on European soil. The company's intention is to bring its products closer to customers, to European manufacturers. The plant in Hungary will be a center of international relevance due to its modernity and volume of work and production. With an execution period of 64 months, the first foundations are already being laid so that in 2027, when the factory is fully operational, it will be capable of producing 100 GWh of batteries per year.

The first of the factories in Europe is located in Germany, in the town of Erfurt, which has recently received the go-ahead from the authorities to begin its production stage. None of this has prevented CATL's leadership from thinking about a third floor where it can further expand its activities. Obviously the plans are in such an incipient phase that it is not possible to talk about possible locations yet; in fact, it is not even possible to say firmly that it will be finally built, since Europe is currently facing serious energy problems.

The Chinese are very doubtful about the viability of the energy project in Europe: the cost of energy and fuel, especially gas, is skyrocketing; with these energy prices, it is very difficult to find economic viability for a project that could exceed many billions of euros. To have an idea, the Hungarian plant has a budget of 7,300 million euros, a cost that has been partially assumed by some of its business partners, such as Mercedes-Benz.

As stated by Matthias Zentgraf, president of the company for Europe: “We are thinking about it, but there is currently no clear decision or activity. We will not build a third plant if there are no volume prospects. We are also affected by the shortage of natural gas, which is very important for the cell production process because we need a lot of energy. We are working intensely on forms of substitution, and we already have a very, very promising idea, to replace gas with renewable energies”.

Without specifying anything more about it, the president for CATL Europe leaves many open fronts and at the same time some certainties. It is clear that the board of directors must carefully evaluate what measures to take for that third factory in Europe, although it will surely also seek to negotiate with the authorities possible subsidies and tax advantages that make the new productive adventure more attractive. In any case, the process will be slow and if it finally comes to fruition, it will not be available until the end of this decade.

All images courtesy of Tesla Inc.

Nico Caballero is the VP of Finance of Cogency Power, specializing in solar energy. He also holds a Diploma in Electric Cars from Delft University of Technology in the Netherlands, and enjoys doing research about Tesla and EV batteries. He can be reached at @NicoTorqueNews on Twitter. Nico covers Tesla and electric vehicle latest happenings at Torque News.