Investments in automaker batteries took a nativist turn this week. This is not a surprising development, but it comes with additional risks.
Mercedes-Benz announced on Friday that it would take a 33% stake in Automotive Cells Company, a European battery start-up that had previously received backing from French energy giant Total, transatlantic auto giant Stellantis and, above all, from the European Union. Total, Stellantis and Mercedes-Benz will end up with a third each of a company that plans to spend at least € 7 billion, equivalent to around $ 8.22 billion, through 2030 to build European manufacturing plants. cells, or “gigafactories” in Elon Musk. Mercedes-Benz said it is committing less than a billion euros in total, which involves heavy debts and subsidies in the project.
The deal follows the announcement earlier this week that Ford will invest $ 50 million in Redwood Materials, a startup trying to bring the lithium-ion battery supply chain to the United States. that match Tesla for wild ambition. Last week, the company said it aims to produce enough battery electrode materials for one million electric vehicles by 2025 and five million by 2030, which would equate to nearly half of the total vehicle production in the United States in a typical year.
They’re very different deals, but they have something in common: Iconic auto brands on either side of the Atlantic are supporting local battery companies with not only local factories, but also local founders and owners.
Earlier this year, Ford launched a joint venture with South Korean company SK Innovation, one of the East Asian business cabals that currently dominate the global battery market. Until now, the main battery suppliers to Mercedes-Benz, whose main shareholder is Chinese auto billionaire Li Shufu, have both been Chinese: CATL and Farasis Energy, in which it has a small stake. Companies needed these partners for their know-how and their proven production capacities.
ACC and Redwood are unproven startups with small but big projects and well-connected funders, but they have political clout that East Asian companies cannot. In Europe, ACC was born from the Franco-German project of an Airbus-type consortium for batteries, a pillar of the European Union’s new industrial strategy to compete with China.
The United States under President Biden is taking a similar path. Even in the high-priority electric vehicle industry, Redwood, which emphasizes building onshore supply chains, is in an ideal location for Washington. Currently, American-made batteries are heavily dependent on the inputs of metal processing in China. Tesla gets lithium from Chinese Ganfeng, for example.
The advantage of following the political priorities for Ford and Mercedes-Benz is that they could benefit from more support and public subsidies. The auto industry cannot hope to avoid politics. But there is also a downside: They are moving away from East Asian players with more technical experience. Mercedes-Benz in particular is making its biggest battery bet to date on a company that, at this point, is little more than research and development. Volkswagen is in a similar position with its roughly 20% stake in Swedish battery darling Northvolt.
Local battery companies in the United States and Europe have very high expectations to meet.
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