In order to reduce auto companies' dependence on Asian suppliers, Germany will fund 1 billion euros to the three battery alliances. The funding will strengthen European car companies and battery makers' ability to compete with Asian competitors such as Ningde Times, LG Chem and Samsung. Creating a regional supply chain for the development of electric vehicles will help Germany achieve its EU goals of reducing carbon emissions and reducing fossil fuel consumption.
Last year, the German Ministry of Economic Affairs expressed support for Germany's domestic battery production. German Economic Minister Peter Altmaier said: "Looking now, we can already say that Germany will not only have one battery alliance but may be three." After completing the selection process, the German Ministry of Economy will submit all necessary government subsidy documents to the European Commission. But he declined to say which companies had the best chance of getting the designated funding.
Thirty companies, including Volkswagen, BMW, German battery maker Varta and Swedish battery production startup Northvolt, have applied for government funding from the German Ministry of Economic Affairs. France and Germany have previously asked the European Commission to approve applications for joint government funding to the Cross-Border Battery Alliance, which includes France's PSA Group and its German subsidiary Opel, as well as French battery maker Saft. According to the IPCEI, the EU grants state subsidies only under certain conditions.
European Energy Commission President Maros Sefcovic and Competition Commission President Margrethe Vestager also expressed support for investment in battery production. "We hope to get a clear opinion of the European Union by the end of the year," Altmaier said. He added that the industry's growing interest in battery production also shows that the German government's move to advance the new industry policy plan is correct.
Northvolt has applied for German government funding twice, once to set up a super factory in Germany, and the other application is to hope that the German government will fund its battery research and development projects with Volkswagen. Northvolt and Volkswagen have stated that they plan to invest in a battery plant in Salzgitter, Germany by forming a joint venture, but they did not specify how the investment will be made.
German car companies have been hesitating for years about setting up an electric vehicle battery factory. The hesitation of car companies has accordingly strengthened the pricing power of Asian suppliers. The increasingly stringent European emission regulations and the shift in consumer interest have changed the thinking of car companies, which also means that the demand for electric vehicles and batteries is expected to increase significantly in the next few years.
Business consulting company McKinsey said in a research report that the demand for batteries for electric vehicles produced in Europe will be five times the demand for projects that have been identified so far. McKinsey said that by 2040, the demand for batteries in electric vehicles produced in Europe will reach 1,200 gigawatt hours per year, which is equivalent to 80 super factories with an average capacity of 15 gigawatt hours per year.
In addition, the German government is also providing research facilities to some German companies developing electric vehicle batteries.