April 9, 2025 • 23 mins
The European Union’s battery manufacturing sector has been struggling to stay competitive. In the face of supply chain concerns, technological barriers and record-low prices fueled by the global oversupply of battery packs, existing policy has proved too light to support local producers. Yet with the introduction of the EU’s new Action Plan, further policy support could be on its way, and Chinese battery giants are announcing production facilities in the bloc. Elsewhere, BYD has introduced a brand-new battery that could revolutionize the sector, with promises of rapid charging speeds and extended range for passenger EVs. On today’s show, Tom Rowlands-Rees is joined by BloombergNEF energy storage analyst Andy Leach and trade and supply analyst Matthew Hales to discuss their recent notes “Plan to Save EU Battery Making Marks Protectionist Shift” and “Chinese Battery Makers Double Down on European Factories”.
Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com
Links to research notes from this episode:
Plan to Save EU Battery Making Marks Protectionist Shift - https://www.bnef.com/insights/36075
Chinese Battery Makers Double Down on European Factories - https://www.bnef.com/insights/35985
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is Tom Rowland's Reese and you're listening to Switched on,
the podcast brought to you by BNF. In an era
of trade wars, tariffs and global oversupply of key renewable technologies,
keeping the European Union's battery manufacturing sect competitive is proving
a challenge. In a bid to stimulate growth and secure
its domestic automotive industry, the EU proposed its Industrial Action Plan,
bringing about a new protectionist stance for Europe. Where others
(00:23):
have thrown up near insurmountable barriers to entry, the EU's
plan is somewhat different and could see some of the
Chinese battery giants enter interjoint ventures with European companies to
build out the manufacturing capacity on the continent at scale.
And seeing as we're discussing batteries today, we also take
time to assess BYD's brand new pack. The company says
that some of their new evs will soon be able
to add two hundred and fifty miles range in just
(00:44):
five minutes of charging. This battery could potentially be a
game changer. Today I'm joined by b and EF energy
storage analyst Andy Leach and from our Trade and Supply
Chains Team analyst Matthew Hales, who share findings from their
recently released research notes titled Plan to save EU battery making,
Marx Protect Shift and Chinese battery makers double down on
European factories, which b and EF clients can find at
(01:06):
BNF go on the Bloomberg terminal or on BNF dot com.
All right, let's get to talking about EU battery manufacturing. Andy,
welcome to.
Speaker 2 (01:22):
The pod, Thank you very much.
Speaker 1 (01:24):
And Matthew welcome to the pod.
Speaker 3 (01:26):
Thank you very much for having me back.
Speaker 1 (01:28):
So this EU action plan around batteries, can you tell
us what it's all about before we dive into the details.
Speaker 3 (01:33):
Absolutely.
Speaker 2 (01:33):
So.
Speaker 3 (01:34):
The kind of the main outline of what this policy
is about is it's a action plan about the auto
industry in the EU. It comes from a kind of
collaborative discussion that the EU and auto industry players have
been having over the last month, and it's a proposed plan.
It's not a policy legislation in itself. Everything within this
document still has to go through the EU policy process,
(01:56):
which can take up to a year. Might be a
bit quicker given the importance of this stuff, but because
it's to do with the automotive industry and the transition.
It contains a lot about EV manufacturing and therefore batteries.
Speaker 1 (02:08):
And just before we go into the details, I mean
you mentioned it might become law in less than a year.
I mean, do you feel like there's broad political consensus
that this is a good thing.
Speaker 3 (02:17):
Absolutely, So many of the automakers have been under pressure
at the moment with the emission standards that the European
Union has set. So what those emission standards are is
that by twenty twenty five, so this year, automakers were
supposed to reduce the emissions of the fleet of cars
that they produce compared to twenty twenty one levels by
(02:39):
fifteen percent. Given the intense price competition from Chinese electric
vehicles coming into Europe and also slower EV demand in Europe,
what this has led to is it's pretty tricky for
auto makers to meet those targets, and so the EU
is offered to, instead of having stringent twenty twenty five targets,
spread those reductions between twenty twenty five and two twenty seven.
Speaker 1 (03:01):
I'm just curious to know about how this fits into
the broader context of the EU's on shuring ambitions. And
you know, one just very sort of basic question is,
given what you've just said, could the European automotive sector
not just rely on batteries imported from China in order
to scale their EV manufacturing and sort of meet those
stringent emissions requirements.
Speaker 2 (03:22):
Yes, the short answer is yes, they can do this. However,
this would mean a loss of jobs in EU countries
where the automotive industry has been instrumental in providing industrial jobs.
Across many countries in the EU, there are also local
battery manufacturing facilities. These are typically at the minute owned
and operated by companies which are based out of East Asia,
(03:43):
not actually China too much at the minute, but mostly
South Korean and Japanese companies like LG, Samsung and Panasonic.
Speaker 3 (03:49):
Just to jump in and give some sort of broader
context on the eve's on shoring ambitions and how this
plays into it, I mean, if you're going through the timeline.
In twenty twenty three, the EU reveal the Net Zero
Industry Act, and what that was was a policy in
which the EU first staked out targets for domestic manufacturing
of clean technologies. That's all the bits that we need
(04:10):
to achieve the energy transition and then within that year,
in twenty twenty three and twenty twenty four, the EU
and different member states in Europe were working out how
to fund these industries, what pots of money to use,
and how that would all work. The Commission asked Mario Draghi,
the ex Prime Minister of Italy, to write a report
about how the EU was lacking competitiveness, where it was
(04:31):
lacking competitors and what reform was needed. That came out
the end of twenty twenty four, and the EU Commission
looked at what it should be implementing, and in twenty
twenty five we've had what I can only describe as
a flurry of policies. In the earliest part of the
year we had something called the Competitiveness Compass, pretty much
laying out how the EU is going to be regulating
and writing new legislation over the next couple of years
(04:53):
to achieve its on shoring goals. We then had the
Clean Industrial Deal, looking more at heavy industries, but also
there's some focus on on clean technologies. And then we
have this in this action Plan for the automotive sector.
Speaker 1 (05:04):
And the goal is very much focused on on showing
the entire supply chain for well, not just electric vehicles,
but because we're talking about batteries, I suppose for this
podcast specific electric vehicles, aiming to ensure the entire battery
chain without you know, minimizing foreign dependencies.
Speaker 3 (05:19):
There absolutely so, the Netze Industry Act staked out targets
across a bunch of technology. So across all these different technologies,
the EU wants to meet forty percent of demand in
twenty thirty for these different products. And this ranges quite
a lot between the different types of technology. So batteries,
for example, is a ninety percent target, which is much
(05:39):
much higher.
Speaker 1 (05:40):
There's something I just want to sort of really fundamentally
sort of get your take on, is whether this is
good strategy because ninety percent for batteries and industry whether
the EU, to my understanding, is quite a long way
behind China, But that is critical to another industry, automotive,
where the EU is not, you know, a million miles
behind China, but needs to evolve to a electric vehicles.
(06:00):
If we believe that's the future, then is it not
creating its own roadblock to itself? If you know, by
trying to own the entire supply chain so fully, is
it not a gamble that you're going to lose the
whole supply chain in terms of competitiveness, whereas a safe
option might be to say, Okay, we're not going to
compete with China on batteries, but we can make better
(06:22):
cars than China, so let's focus on doing that using
Chinese batteries.
Speaker 2 (06:26):
I think you're hitting the nail on the head with that,
tom So the EU on capacity terms, is far behind
China in cell manufacturing, but put even worse in things
like component manufacturing anodes, cathodes, separators, and electrolyte. This industry
is lacking and part of the problem has been previous policy.
So other policy incentives have really focused around the big
(06:47):
ticket item of cell manufacturing, pouring large amounts of money
and subsidy into this, whereas components and other parts of
the supply chain haven't received as much help, and as
a consequence, those announcements haven't come. Now, trying to force
this in a relatively short period of time going to
twenty thirty is certainly going to be a challenge, particularly
as Chinese manufacturers like bide c Atl and others are
(07:08):
continuing to improve their products. So you're competing against the
moving targets as well.
Speaker 1 (07:13):
So I think we've kind of set the broader landscape
and you know, we've you've kind of painted the picture
of the EU has targets, it has policies in the pipeline.
Tell me about what's actually been happening in the European
battery manufacturing space, because I think we've been talking about
it in slightly abstract right now, but yeah, be good
to get some more detail on that.
Speaker 2 (07:32):
Sure. So, as I mentioned, making batteries in the EU
has to date largely been companies based in Asia, and
as I said that of South Korea and Japan at
the minute, and more and more of the announcements are
coming from companies in China as well now. So in
the start of this year we saw CATL, the world's
largest battery manufacturing company, and CALB, another large Chinese manufacturer,
(07:54):
both pressing ahead with billions of euros of investment seven
and two billion, respectively. So seven billion euros for coatl's
one hundred gigawor toarer factory in Hungary and two billion
for Colb's fifteen gigaar tower factory in Portugal. And that
is in front of the backdrop of the United States
making it more difficult to invest. And at the same time,
in Europe you're having local companies such as Northfault really struggling,
(08:17):
filing for bankruptcy in the US at the end of
last year and filing for bankruptcy at home only last month.
So there is a battery industry in Europe. People are
putting lots of money in but at the minute, the
vast majority of capacity that exists is owned by Asian players,
and a lot of the capacity which is likely to
come online in the near future is probably going to
be coming from work with Chinese players.
Speaker 1 (08:38):
So if Asian players are investing in manufacturing capacity in Europe,
you know, from an EU perspective, that's not necessarily a
bad thing. But I mean, is that perceived as something
that the EU wants to try and balance out and
more generally, how does the action plan shake up this
picture you've just painted.
Speaker 2 (08:55):
I don't think it's a bad thing. As I mentioned earlier,
Coatl is the largest battery of manufacturing company in the world.
But not only are they the largest, but themselves among
with others like Goshen and coelb BYD, they make very
good quality products. So it's not like that they're making
less good products. They're actually making some of the world
leading products these companies. So I think it's good to
have these companies building factories in Europe, and if they do,
(09:16):
then that does come with local jobs.
Speaker 3 (09:18):
I mean, just as Andy was saying, I think, I
think really what the EU Commission has done with this
policy plan is it's just taken a stock take over
how the battery industry has developed in Europe, realized that
the homegrown manufacturers like Northfolt haven't been very successful where
East Asian companies have been. And they're basically trying to
come up with a way of incentivizing joint ventures between
(09:39):
East Asian companies and European countries to have some level
of knowledge transfer happen within Europe. And as Andy says,
local jobs.
Speaker 1 (09:47):
That's interesting. So the key thing here is not about,
you know, making it that European owned companies have some
kind of unfair advantage in Europe. It's about joint ventures
and ensuring knowledge transfer if there are is going to
be manufacturing located in Europe. Is that really the sort
of the essence of the action plan.
Speaker 3 (10:06):
So the action plan has got multiple elements and I
think that's one of the main takeaways that we had
from it. It's a bit of a shift from what
the EU was saying before, where it was trying to
have its own manufacturers make the batteries. This is something
new in the clean tech space. This has done quite
a lot. This is how China became so competitive in
areas like solar back in the day, was through imposing
(10:28):
joint ventures. And so what the Action Plan is doing
is it's kind of a signal shift that the EU
is open to these policies.
Speaker 1 (10:35):
So, I mean, we'll get onto the US in a second,
because it's hard not to. But what's specifically in the
Action Plan is there that is sort of incentivizing slash
forcing joint ventures to happen.
Speaker 3 (10:46):
There's a couple of elements. The first is that there's
an idea that foreign direct investment rules might be tweaked
within the EU, so that if a East Asian company
was trying to set up a manufacturing facility in the EU,
there would have to be some form of joint venture happening.
It's not clear at all at this point how that
will be enforced, how strict that would be, what that
(11:07):
will entail, but that will become apparent over the coming months.
There's a second element of this, which is the EU
is looking at something they've phrased as European content requirements.
This is something that the EU has generally stayed away
from before, just because the term local content requirements is
seen as a breach of international trade law. A lot
(11:28):
of the time, the EU is strongly committed to upholding
WTO rules and being one of the free trade blocks
in the world, but there's a growing shift happening within
the Commission's mindset that they're going to have to start
incentivizing European manufacturing in ways that they haven't previously done.
Speaker 1 (11:46):
So, you know, we've kind of been hinting at the
US and we're recording this after America's Liberation Day with
sort of an announcement of broad ranging tariffs around the world,
and you know this is there were tariffs implemented before
that they are more targeted and they'll be I'm sure
there'll be some afterwards. But we're living in this crowd
of a brewing global trade war with the US kind
(12:07):
of at the center of the melee, and the EU
has internet rejected protectionist policies with these announcements. Do you
think that things like local content rules could start playing
in a new direction.
Speaker 3 (12:19):
Absolutely so. I think the European content requirements is a
pretty big shift on the EU front. If it's required
that evs sold in the EU must have some form
of a European battery, that's quite a big shift what
the traditional over the world.
Speaker 1 (12:34):
You say it must have a European battery, I mean,
does that mean in order to qualify for certain incentives
or do you mean that there's just going to be
you can't have an EV that doesn't have a certain
proportion of local content.
Speaker 3 (12:47):
From my understanding, the actual way it's going to be
implemented hasn't really been set out, but it is most
likely to be actually selling into the EU.
Speaker 2 (12:56):
Right from my perspective, there are many places around the
world that produce a lot of batteries. China's the largest.
China is already being hit by tariffs and by the US,
I should say, and we'll wait to see how these
additional tariffs play out, but China already has enough manufacturing
capacity to produce multiples of the world's battery demand. And
if you take one of the larger markets out like
(13:16):
the US, with a relatively large EV market and a
growing stationary storage market. Out of the mix, there's going
to be a lot of factory capacity and a lot
of batteries being produced that need somewhere to go, whether
or not they end up in the EU. I mean,
maybe some of these policies, once we know exactly how
they'll be implemented, might make that tricky, but they're likely
to end up somewhere exactly.
Speaker 3 (13:35):
And these new tariffs which have been unlocked, because the
imports will be coming into the EU most likely as
the second most high value market compared to the US,
it's going to put additional pressure onto the Commission in
terms of how does it deal with that, How does
it deal with the pressure of imports coming from elsewhere
which are more cost competitive than what it can produce
at home. And the EU is going to have to
(13:55):
figure out whether it will apply trade barriers in terms
of higher tariff or whether it's going to use these
local content rules in some form.
Speaker 1 (14:03):
It's so interesting just the mind shift the world has
gone through in the last however many years. Because you know,
when you're describing there's overcapacity in China, America has shut
the door and says doesn't want any of the batteries.
You would just think someone else is going to benefit
from some really really really cheap batteries and you know,
can create all sorts of value off the back of that.
(14:25):
But instead that's not the direction things going. This is
not really a question, it's just a reflection, I suppose,
on how different things are from the sort of the
neoliberal world of not very long ago.
Speaker 2 (14:35):
One comment I could add to that, and what we
saw last year was a very sort of steep decline
in battery prices, and this wasn't a regional thing but
a sectoral thing. EV demand was slower than we'd anticipated,
and as a consequence, there was you know, were seeing
a similar thing with batteries being produced in battery capacity
out there without the demand, but in this sense because
of consumer pressures rather than geopolitical ones. And as a consequence,
(14:57):
we saw significantly more stationary storage build out than we'd anticipated.
So while EV sales were down, it meant that another
demand sector in stationary storage was up. And it's possible
that we see something similar happen with the US making
it difficult for imported batteries to come in.
Speaker 1 (15:13):
Yeah, it's interesting I remember my first ever time co
hosting the switch to On podcast. We were talking about
US protectionism around solar, and I remember saying, solar is
famously this low margin business like manufacturing PV because of
you know, over capacity, and so I was sort of
just saying, like, is this really an industry worth fighting over?
(15:35):
There must be other parts of the value chain with
the margins are bigger. I find myself wondering, you know,
listening to what you're saying, whether the same can be
said around some of this fight to secure a battery
manufacturing industry. Is you know, in the long term future
of electric vehicles, is this just going to be the
really low margin part of the business is there? Is
it sort of somewhat misguided to be although it's a
(15:56):
significant fraction of the value of an ev right now,
do you go what I'm it makes it hard to
see how anyone's going to make any money in this
environment that seems to be evolving.
Speaker 2 (16:06):
I think there's a few different pressures at play, and
cost is of course one of them, but there's also
the geopolitical risk and supply chain risk of trade. And
you mentioned when we're recording this podcast. Any days after
a ginormous change in or what looks like it's going
to be an absolutely ginormous change in global trade. Being
able to have a secure supply chain is looking like
a short supply chain in where we are today and
(16:28):
the political and geopolitical climate we find ourselves in. So
the shorter you can make that supply chain, the more
confident and the less risk there is in that supply chain.
And that's something that maybe five or ten years ago
was less of a risk, and as a consequence, there's
been a bit of a scramble in the last few
years to try and unsure this. And yes, of course
you need and want to be cost competitive, but there's
also a supply chain risk play here as well.
Speaker 3 (16:50):
One thing, just to add to what Andy said there
is the way that the EU and the US talks
about this is different, and I think that's really interesting.
The US has for the first time with its auto tariffs,
and now the reciprocal tariffs are being implemented using the
same bit of legislation, and it's a direct call for
putting tariffs on clean tech products as a result of
(17:11):
a national security risk. In the EU, it's not talked
about in the same way it's about reducing reliance increasing diversification,
and so they're slightly different terms, but the end product,
I think best motto that Andy just said there, it's
best supply chains short supply chain.
Speaker 1 (17:26):
Just for the sake of definitions for those of you
not familiar with the term that Andy used ginormous. That
is a compound word that combines giant and enormous, so
he means really big, really big changes happening around the world.
So Andy, you remember of our battery team, it would
be hard to not ask a quick question on BID's
exciting new battery that has been making headlines. So what
(17:49):
is the big deal?
Speaker 2 (17:50):
Great question, tom so, Bid, which is the world's largest
seller of electric vehicles, last month announced a battery pack
which in five minutes can add four hundred kilometers of
very or two hundred and fifty miles. So this is
bringing battery packs really close and similar to the experience
of filling up an internal combustion engine tank with petrol
(18:11):
or dieseled.
Speaker 1 (18:12):
So it has this impressive charging rate. How is that possible?
Speaker 2 (18:16):
Yeap. So typically when we talk about megawat charging, so
mega what being a thousand killer charging that has been
in the context of commercial vehicles, so vans and lorries
semis if you're listening to this in the US, because
the amount of power needed is very, very large, and
the infrastructure likely is going to be more costly, and
as a consequence, people are thinking about the bigger vehicles.
(18:37):
This is the first time we've heard people talking about
megawat charging, So a thousand killer Watch charging for passenger
ev How is this possible? So we're still waiting for
all of the details on this, but we know that
they're talking about a dual gun technology, so this means
maybe plugging two chargers into the same car. So this
could potentially be a challenge if it's a busy charging
(18:58):
station or something like this, but we can get that
mega watch charging. The other thing to comment on here
is the charging infrastructure is what we've been told so far,
actually requires a battery in the charger. So in the
charger when you go to your charging station, there needs
to be a battery there because the amount of power
required is too great to be pulling that straight from
the grid into the car. So there's a battery and
(19:18):
you're charging your car from a stationary battery at the
charging station to sort of reduce some of the constraints
that maybe the grid would bring.
Speaker 1 (19:25):
I mean, as a battery analyst, you must be loving this.
It's a battery that requires demand for more batteries.
Speaker 2 (19:31):
Yes, so it covers both sides of the biggest part
of battery demand, which is stationary storage and electric vehicles,
to provide something which ultimately consumers want and will hopefully
increase the adoption of both evs. And then as you say,
as we need more of this charging infrastructure stationary storage
batteries as well.
Speaker 1 (19:48):
It's really interesting. I mean, and I realize been now
sort of straying off the topic of batteries onto the
sort of the grid. But was this always going to
happen at some point that battery charge, you know, as
these advances in charging technol logy happened, that charging stations
when it would inevitably be a source of stationary storage.
Speaker 2 (20:05):
So there's a number of different ways that you can
solve the issue of range anxiety or charging speeds. Switching
batteries is one of them. There are some companies out there,
like Neo in China who are doing this, so changing
your battery and that obviously can be very very fast.
I think they have it down to sub five minutes
in a charging station. These battery packs are quite heavy,
so it's not as simple as taking a battery out
(20:26):
of a remote control or something like this. There's the
machinery that does it, but the other the alternative is
charging faster and faster. And as you charge faster and faster,
Whilst she said in the previous question that this sort
of is more batteries going everywhere, maybe as you charge
faster and faster, you're actually happier with a smaller battery
pack because you know, when you get to a charging station,
(20:46):
you don't need to wait so long and you get
halver many miles or kilometers of range very very quickly.
So there's a lot of different factors pulling demand and
sort of charging speeds. And one of the caveats just
to say here as well, is this charging in for show,
which it doesn't exist anywhere. So currently top of the
range charging infrastructures three hundred and fifty kilo what so
this is three times greater than that, So it requires
(21:07):
a build out of charging infrastructure as well.
Speaker 1 (21:10):
Got it, And I suppose in terms of charging speeds,
does this sort of represent the end of the road
in that I just can't imagine there ever being a
need for it to be faster than what you've just stated.
You know, once you go from five minutes to three minutes,
I mean, what difference does it make to anyone unless
you're like doing formula E or something like that.
Speaker 2 (21:32):
Yeah, I completely agree, so that there's certainly diminishing returns
going from thirty minutes to five minutes, from going from
five minutes to one minute, consumers will notice this less.
So is it the end of the road. Will innovation
continue to come? It probably will. What we haven't talked
about is charging faster almost certainly always degrade your battery
more so, if I were to have one of these cars,
without having any more details from bid but I would
(21:54):
say I would try and charge it slowly as often
as possible. But when I do a long journey, then
that's what I'm going to say. Okay, I want to
do this in five minutes. And just to put that
into some context, And I don't know if this will
land with our international listeners, but from London you could
drive to Edinburgh with one five minute charge with one
of these cars. This is a particularly long journey and
I think most drivers would probably stop at least once
(22:15):
on that journey.
Speaker 1 (22:16):
I mean, I would say, as a brit living in
the US that I understand your context that driving from
London to Edinburgh is like going from one side of
the planet to the other. But to Americans that's like
popping out for some milk. Andy. Thanks very much for
joining us today.
Speaker 2 (22:31):
Thank you very much, Tom being great being back on
the show.
Speaker 1 (22:34):
And Matthew thanks for joining us today.
Speaker 3 (22:35):
Thank you very much.
Speaker 1 (22:45):
Today's episode of Switched On was produced by Cam Gray
with production assistance from Kamala Shelling.
Speaker 2 (22:51):
Bloomberg n EF is a service provided by Bloomberg Finance
LP and its affiliates.
Speaker 1 (22:55):
This recording does not constitute, nor should it be construed
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Speaker 3 (23:04):
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Liability as a result of this recording is expressly disclaimed
This is Tom Rowland's Reese and you're listening to Switched on,
the podcast brought to you by BNF. In an era
of trade wars, tariffs and global oversupply of key renewable technologies,
keeping the European Union's battery manufacturing sect competitive is proving
a challenge. In a bid to stimulate growth and secure
its domestic automotive industry, the EU proposed its Industrial Action Plan,
bringing about a new protectionist stance for Europe. Where others
(00:23):
have thrown up near insurmountable barriers to entry, the EU's
plan is somewhat different and could see some of the
Chinese battery giants enter interjoint ventures with European companies to
build out the manufacturing capacity on the continent at scale.
And seeing as we're discussing batteries today, we also take
time to assess BYD's brand new pack. The company says
that some of their new evs will soon be able
to add two hundred and fifty miles range in just
(00:44):
five minutes of charging. This battery could potentially be a
game changer. Today I'm joined by b and EF energy
storage analyst Andy Leach and from our Trade and Supply
Chains Team analyst Matthew Hales, who share findings from their
recently released research notes titled Plan to save EU battery making,
Marx Protect Shift and Chinese battery makers double down on
European factories, which b and EF clients can find at
(01:06):
BNF go on the Bloomberg terminal or on BNF dot com.
All right, let's get to talking about EU battery manufacturing. Andy,
welcome to.
Speaker 2 (01:22):
The pod, Thank you very much.
Speaker 1 (01:24):
And Matthew welcome to the pod.
Speaker 3 (01:26):
Thank you very much for having me back.
Speaker 1 (01:28):
So this EU action plan around batteries, can you tell
us what it's all about before we dive into the details.
Speaker 3 (01:33):
Absolutely.
Speaker 2 (01:33):
So.
Speaker 3 (01:34):
The kind of the main outline of what this policy
is about is it's a action plan about the auto
industry in the EU. It comes from a kind of
collaborative discussion that the EU and auto industry players have
been having over the last month, and it's a proposed plan.
It's not a policy legislation in itself. Everything within this
document still has to go through the EU policy process,
(01:56):
which can take up to a year. Might be a
bit quicker given the importance of this stuff, but because
it's to do with the automotive industry and the transition.
It contains a lot about EV manufacturing and therefore batteries.
Speaker 1 (02:08):
And just before we go into the details, I mean
you mentioned it might become law in less than a year.
I mean, do you feel like there's broad political consensus
that this is a good thing.
Speaker 3 (02:17):
Absolutely, So many of the automakers have been under pressure
at the moment with the emission standards that the European
Union has set. So what those emission standards are is
that by twenty twenty five, so this year, automakers were
supposed to reduce the emissions of the fleet of cars
that they produce compared to twenty twenty one levels by
(02:39):
fifteen percent. Given the intense price competition from Chinese electric
vehicles coming into Europe and also slower EV demand in Europe,
what this has led to is it's pretty tricky for
auto makers to meet those targets, and so the EU
is offered to, instead of having stringent twenty twenty five targets,
spread those reductions between twenty twenty five and two twenty seven.
Speaker 1 (03:01):
I'm just curious to know about how this fits into
the broader context of the EU's on shuring ambitions. And
you know, one just very sort of basic question is,
given what you've just said, could the European automotive sector
not just rely on batteries imported from China in order
to scale their EV manufacturing and sort of meet those
stringent emissions requirements.
Speaker 2 (03:22):
Yes, the short answer is yes, they can do this. However,
this would mean a loss of jobs in EU countries
where the automotive industry has been instrumental in providing industrial jobs.
Across many countries in the EU, there are also local
battery manufacturing facilities. These are typically at the minute owned
and operated by companies which are based out of East Asia,
(03:43):
not actually China too much at the minute, but mostly
South Korean and Japanese companies like LG, Samsung and Panasonic.
Speaker 3 (03:49):
Just to jump in and give some sort of broader
context on the eve's on shoring ambitions and how this
plays into it, I mean, if you're going through the timeline.
In twenty twenty three, the EU reveal the Net Zero
Industry Act, and what that was was a policy in
which the EU first staked out targets for domestic manufacturing
of clean technologies. That's all the bits that we need
(04:10):
to achieve the energy transition and then within that year,
in twenty twenty three and twenty twenty four, the EU
and different member states in Europe were working out how
to fund these industries, what pots of money to use,
and how that would all work. The Commission asked Mario Draghi,
the ex Prime Minister of Italy, to write a report
about how the EU was lacking competitiveness, where it was
(04:31):
lacking competitors and what reform was needed. That came out
the end of twenty twenty four, and the EU Commission
looked at what it should be implementing, and in twenty
twenty five we've had what I can only describe as
a flurry of policies. In the earliest part of the
year we had something called the Competitiveness Compass, pretty much
laying out how the EU is going to be regulating
and writing new legislation over the next couple of years
(04:53):
to achieve its on shoring goals. We then had the
Clean Industrial Deal, looking more at heavy industries, but also
there's some focus on on clean technologies. And then we
have this in this action Plan for the automotive sector.
Speaker 1 (05:04):
And the goal is very much focused on on showing
the entire supply chain for well, not just electric vehicles,
but because we're talking about batteries, I suppose for this
podcast specific electric vehicles, aiming to ensure the entire battery
chain without you know, minimizing foreign dependencies.
Speaker 3 (05:19):
There absolutely so, the Netze Industry Act staked out targets
across a bunch of technology. So across all these different technologies,
the EU wants to meet forty percent of demand in
twenty thirty for these different products. And this ranges quite
a lot between the different types of technology. So batteries,
for example, is a ninety percent target, which is much
(05:39):
much higher.
Speaker 1 (05:40):
There's something I just want to sort of really fundamentally
sort of get your take on, is whether this is
good strategy because ninety percent for batteries and industry whether
the EU, to my understanding, is quite a long way
behind China, But that is critical to another industry, automotive,
where the EU is not, you know, a million miles
behind China, but needs to evolve to a electric vehicles.
(06:00):
If we believe that's the future, then is it not
creating its own roadblock to itself? If you know, by
trying to own the entire supply chain so fully, is
it not a gamble that you're going to lose the
whole supply chain in terms of competitiveness, whereas a safe
option might be to say, Okay, we're not going to
compete with China on batteries, but we can make better
(06:22):
cars than China, so let's focus on doing that using
Chinese batteries.
Speaker 2 (06:26):
I think you're hitting the nail on the head with that,
tom So the EU on capacity terms, is far behind
China in cell manufacturing, but put even worse in things
like component manufacturing anodes, cathodes, separators, and electrolyte. This industry
is lacking and part of the problem has been previous policy.
So other policy incentives have really focused around the big
(06:47):
ticket item of cell manufacturing, pouring large amounts of money
and subsidy into this, whereas components and other parts of
the supply chain haven't received as much help, and as
a consequence, those announcements haven't come. Now, trying to force
this in a relatively short period of time going to
twenty thirty is certainly going to be a challenge, particularly
as Chinese manufacturers like bide c Atl and others are
(07:08):
continuing to improve their products. So you're competing against the
moving targets as well.
Speaker 1 (07:13):
So I think we've kind of set the broader landscape
and you know, we've you've kind of painted the picture
of the EU has targets, it has policies in the pipeline.
Tell me about what's actually been happening in the European
battery manufacturing space, because I think we've been talking about
it in slightly abstract right now, but yeah, be good
to get some more detail on that.
Speaker 2 (07:32):
Sure. So, as I mentioned, making batteries in the EU
has to date largely been companies based in Asia, and
as I said that of South Korea and Japan at
the minute, and more and more of the announcements are
coming from companies in China as well now. So in
the start of this year we saw CATL, the world's
largest battery manufacturing company, and CALB, another large Chinese manufacturer,
(07:54):
both pressing ahead with billions of euros of investment seven
and two billion, respectively. So seven billion euros for coatl's
one hundred gigawor toarer factory in Hungary and two billion
for Colb's fifteen gigaar tower factory in Portugal. And that
is in front of the backdrop of the United States
making it more difficult to invest. And at the same time,
in Europe you're having local companies such as Northfault really struggling,
(08:17):
filing for bankruptcy in the US at the end of
last year and filing for bankruptcy at home only last month.
So there is a battery industry in Europe. People are
putting lots of money in but at the minute, the
vast majority of capacity that exists is owned by Asian players,
and a lot of the capacity which is likely to
come online in the near future is probably going to
be coming from work with Chinese players.
Speaker 1 (08:38):
So if Asian players are investing in manufacturing capacity in Europe,
you know, from an EU perspective, that's not necessarily a
bad thing. But I mean, is that perceived as something
that the EU wants to try and balance out and
more generally, how does the action plan shake up this
picture you've just painted.
Speaker 2 (08:55):
I don't think it's a bad thing. As I mentioned earlier,
Coatl is the largest battery of manufacturing company in the world.
But not only are they the largest, but themselves among
with others like Goshen and coelb BYD, they make very
good quality products. So it's not like that they're making
less good products. They're actually making some of the world
leading products these companies. So I think it's good to
have these companies building factories in Europe, and if they do,
(09:16):
then that does come with local jobs.
Speaker 3 (09:18):
I mean, just as Andy was saying, I think, I
think really what the EU Commission has done with this
policy plan is it's just taken a stock take over
how the battery industry has developed in Europe, realized that
the homegrown manufacturers like Northfolt haven't been very successful where
East Asian companies have been. And they're basically trying to
come up with a way of incentivizing joint ventures between
(09:39):
East Asian companies and European countries to have some level
of knowledge transfer happen within Europe. And as Andy says,
local jobs.
Speaker 1 (09:47):
That's interesting. So the key thing here is not about,
you know, making it that European owned companies have some
kind of unfair advantage in Europe. It's about joint ventures
and ensuring knowledge transfer if there are is going to
be manufacturing located in Europe. Is that really the sort
of the essence of the action plan.
Speaker 3 (10:06):
So the action plan has got multiple elements and I
think that's one of the main takeaways that we had
from it. It's a bit of a shift from what
the EU was saying before, where it was trying to
have its own manufacturers make the batteries. This is something
new in the clean tech space. This has done quite
a lot. This is how China became so competitive in
areas like solar back in the day, was through imposing
(10:28):
joint ventures. And so what the Action Plan is doing
is it's kind of a signal shift that the EU
is open to these policies.
Speaker 1 (10:35):
So, I mean, we'll get onto the US in a second,
because it's hard not to. But what's specifically in the
Action Plan is there that is sort of incentivizing slash
forcing joint ventures to happen.
Speaker 3 (10:46):
There's a couple of elements. The first is that there's
an idea that foreign direct investment rules might be tweaked
within the EU, so that if a East Asian company
was trying to set up a manufacturing facility in the EU,
there would have to be some form of joint venture happening.
It's not clear at all at this point how that
will be enforced, how strict that would be, what that
(11:07):
will entail, but that will become apparent over the coming months.
There's a second element of this, which is the EU
is looking at something they've phrased as European content requirements.
This is something that the EU has generally stayed away
from before, just because the term local content requirements is
seen as a breach of international trade law. A lot
(11:28):
of the time, the EU is strongly committed to upholding
WTO rules and being one of the free trade blocks
in the world, but there's a growing shift happening within
the Commission's mindset that they're going to have to start
incentivizing European manufacturing in ways that they haven't previously done.
Speaker 1 (11:46):
So, you know, we've kind of been hinting at the
US and we're recording this after America's Liberation Day with
sort of an announcement of broad ranging tariffs around the world,
and you know this is there were tariffs implemented before
that they are more targeted and they'll be I'm sure
there'll be some afterwards. But we're living in this crowd
of a brewing global trade war with the US kind
(12:07):
of at the center of the melee, and the EU
has internet rejected protectionist policies with these announcements. Do you
think that things like local content rules could start playing
in a new direction.
Speaker 3 (12:19):
Absolutely so. I think the European content requirements is a
pretty big shift on the EU front. If it's required
that evs sold in the EU must have some form
of a European battery, that's quite a big shift what
the traditional over the world.
Speaker 1 (12:34):
You say it must have a European battery, I mean,
does that mean in order to qualify for certain incentives
or do you mean that there's just going to be
you can't have an EV that doesn't have a certain
proportion of local content.
Speaker 3 (12:47):
From my understanding, the actual way it's going to be
implemented hasn't really been set out, but it is most
likely to be actually selling into the EU.
Speaker 2 (12:56):
Right from my perspective, there are many places around the
world that produce a lot of batteries. China's the largest.
China is already being hit by tariffs and by the US,
I should say, and we'll wait to see how these
additional tariffs play out, but China already has enough manufacturing
capacity to produce multiples of the world's battery demand. And
if you take one of the larger markets out like
(13:16):
the US, with a relatively large EV market and a
growing stationary storage market. Out of the mix, there's going
to be a lot of factory capacity and a lot
of batteries being produced that need somewhere to go, whether
or not they end up in the EU. I mean,
maybe some of these policies, once we know exactly how
they'll be implemented, might make that tricky, but they're likely
to end up somewhere exactly.
Speaker 3 (13:35):
And these new tariffs which have been unlocked, because the
imports will be coming into the EU most likely as
the second most high value market compared to the US,
it's going to put additional pressure onto the Commission in
terms of how does it deal with that, How does
it deal with the pressure of imports coming from elsewhere
which are more cost competitive than what it can produce
at home. And the EU is going to have to
(13:55):
figure out whether it will apply trade barriers in terms
of higher tariff or whether it's going to use these
local content rules in some form.
Speaker 1 (14:03):
It's so interesting just the mind shift the world has
gone through in the last however many years. Because you know,
when you're describing there's overcapacity in China, America has shut
the door and says doesn't want any of the batteries.
You would just think someone else is going to benefit
from some really really really cheap batteries and you know,
can create all sorts of value off the back of that.
(14:25):
But instead that's not the direction things going. This is
not really a question, it's just a reflection, I suppose,
on how different things are from the sort of the
neoliberal world of not very long ago.
Speaker 2 (14:35):
One comment I could add to that, and what we
saw last year was a very sort of steep decline
in battery prices, and this wasn't a regional thing but
a sectoral thing. EV demand was slower than we'd anticipated,
and as a consequence, there was you know, were seeing
a similar thing with batteries being produced in battery capacity
out there without the demand, but in this sense because
of consumer pressures rather than geopolitical ones. And as a consequence,
(14:57):
we saw significantly more stationary storage build out than we'd anticipated.
So while EV sales were down, it meant that another
demand sector in stationary storage was up. And it's possible
that we see something similar happen with the US making
it difficult for imported batteries to come in.
Speaker 1 (15:13):
Yeah, it's interesting I remember my first ever time co
hosting the switch to On podcast. We were talking about
US protectionism around solar, and I remember saying, solar is
famously this low margin business like manufacturing PV because of
you know, over capacity, and so I was sort of
just saying, like, is this really an industry worth fighting over?
(15:35):
There must be other parts of the value chain with
the margins are bigger. I find myself wondering, you know,
listening to what you're saying, whether the same can be
said around some of this fight to secure a battery
manufacturing industry. Is you know, in the long term future
of electric vehicles, is this just going to be the
really low margin part of the business is there? Is
it sort of somewhat misguided to be although it's a
(15:56):
significant fraction of the value of an ev right now,
do you go what I'm it makes it hard to
see how anyone's going to make any money in this
environment that seems to be evolving.
Speaker 2 (16:06):
I think there's a few different pressures at play, and
cost is of course one of them, but there's also
the geopolitical risk and supply chain risk of trade. And
you mentioned when we're recording this podcast. Any days after
a ginormous change in or what looks like it's going
to be an absolutely ginormous change in global trade. Being
able to have a secure supply chain is looking like
a short supply chain in where we are today and
(16:28):
the political and geopolitical climate we find ourselves in. So
the shorter you can make that supply chain, the more
confident and the less risk there is in that supply chain.
And that's something that maybe five or ten years ago
was less of a risk, and as a consequence, there's
been a bit of a scramble in the last few
years to try and unsure this. And yes, of course
you need and want to be cost competitive, but there's
also a supply chain risk play here as well.
Speaker 3 (16:50):
One thing, just to add to what Andy said there
is the way that the EU and the US talks
about this is different, and I think that's really interesting.
The US has for the first time with its auto tariffs,
and now the reciprocal tariffs are being implemented using the
same bit of legislation, and it's a direct call for
putting tariffs on clean tech products as a result of
(17:11):
a national security risk. In the EU, it's not talked
about in the same way it's about reducing reliance increasing diversification,
and so they're slightly different terms, but the end product,
I think best motto that Andy just said there, it's
best supply chains short supply chain.
Speaker 1 (17:26):
Just for the sake of definitions for those of you
not familiar with the term that Andy used ginormous. That
is a compound word that combines giant and enormous, so
he means really big, really big changes happening around the world.
So Andy, you remember of our battery team, it would
be hard to not ask a quick question on BID's
exciting new battery that has been making headlines. So what
(17:49):
is the big deal?
Speaker 2 (17:50):
Great question, tom so, Bid, which is the world's largest
seller of electric vehicles, last month announced a battery pack
which in five minutes can add four hundred kilometers of
very or two hundred and fifty miles. So this is
bringing battery packs really close and similar to the experience
of filling up an internal combustion engine tank with petrol
(18:11):
or dieseled.
Speaker 1 (18:12):
So it has this impressive charging rate. How is that possible?
Speaker 2 (18:16):
Yeap. So typically when we talk about megawat charging, so
mega what being a thousand killer charging that has been
in the context of commercial vehicles, so vans and lorries
semis if you're listening to this in the US, because
the amount of power needed is very, very large, and
the infrastructure likely is going to be more costly, and
as a consequence, people are thinking about the bigger vehicles.
(18:37):
This is the first time we've heard people talking about
megawat charging, So a thousand killer Watch charging for passenger
ev How is this possible? So we're still waiting for
all of the details on this, but we know that
they're talking about a dual gun technology, so this means
maybe plugging two chargers into the same car. So this
could potentially be a challenge if it's a busy charging
(18:58):
station or something like this, but we can get that
mega watch charging. The other thing to comment on here
is the charging infrastructure is what we've been told so far,
actually requires a battery in the charger. So in the
charger when you go to your charging station, there needs
to be a battery there because the amount of power
required is too great to be pulling that straight from
the grid into the car. So there's a battery and
(19:18):
you're charging your car from a stationary battery at the
charging station to sort of reduce some of the constraints
that maybe the grid would bring.
Speaker 1 (19:25):
I mean, as a battery analyst, you must be loving this.
It's a battery that requires demand for more batteries.
Speaker 2 (19:31):
Yes, so it covers both sides of the biggest part
of battery demand, which is stationary storage and electric vehicles,
to provide something which ultimately consumers want and will hopefully
increase the adoption of both evs. And then as you say,
as we need more of this charging infrastructure stationary storage
batteries as well.
Speaker 1 (19:48):
It's really interesting. I mean, and I realize been now
sort of straying off the topic of batteries onto the
sort of the grid. But was this always going to
happen at some point that battery charge, you know, as
these advances in charging technol logy happened, that charging stations
when it would inevitably be a source of stationary storage.
Speaker 2 (20:05):
So there's a number of different ways that you can
solve the issue of range anxiety or charging speeds. Switching
batteries is one of them. There are some companies out there,
like Neo in China who are doing this, so changing
your battery and that obviously can be very very fast.
I think they have it down to sub five minutes
in a charging station. These battery packs are quite heavy,
so it's not as simple as taking a battery out
(20:26):
of a remote control or something like this. There's the
machinery that does it, but the other the alternative is
charging faster and faster. And as you charge faster and faster,
Whilst she said in the previous question that this sort
of is more batteries going everywhere, maybe as you charge
faster and faster, you're actually happier with a smaller battery
pack because you know, when you get to a charging station,
(20:46):
you don't need to wait so long and you get
halver many miles or kilometers of range very very quickly.
So there's a lot of different factors pulling demand and
sort of charging speeds. And one of the caveats just
to say here as well, is this charging in for show,
which it doesn't exist anywhere. So currently top of the
range charging infrastructures three hundred and fifty kilo what so
this is three times greater than that, So it requires
(21:07):
a build out of charging infrastructure as well.
Speaker 1 (21:10):
Got it, And I suppose in terms of charging speeds,
does this sort of represent the end of the road
in that I just can't imagine there ever being a
need for it to be faster than what you've just stated.
You know, once you go from five minutes to three minutes,
I mean, what difference does it make to anyone unless
you're like doing formula E or something like that.
Speaker 2 (21:32):
Yeah, I completely agree, so that there's certainly diminishing returns
going from thirty minutes to five minutes, from going from
five minutes to one minute, consumers will notice this less.
So is it the end of the road. Will innovation
continue to come? It probably will. What we haven't talked
about is charging faster almost certainly always degrade your battery
more so, if I were to have one of these cars,
without having any more details from bid but I would
(21:54):
say I would try and charge it slowly as often
as possible. But when I do a long journey, then
that's what I'm going to say. Okay, I want to
do this in five minutes. And just to put that
into some context, And I don't know if this will
land with our international listeners, but from London you could
drive to Edinburgh with one five minute charge with one
of these cars. This is a particularly long journey and
I think most drivers would probably stop at least once
(22:15):
on that journey.
Speaker 1 (22:16):
I mean, I would say, as a brit living in
the US that I understand your context that driving from
London to Edinburgh is like going from one side of
the planet to the other. But to Americans that's like
popping out for some milk. Andy. Thanks very much for
joining us today.
Speaker 2 (22:31):
Thank you very much, Tom being great being back on
the show.
Speaker 1 (22:34):
And Matthew thanks for joining us today.
Speaker 3 (22:35):
Thank you very much.
Speaker 1 (22:45):
Today's episode of Switched On was produced by Cam Gray
with production assistance from Kamala Shelling.
Speaker 2 (22:51):
Bloomberg n EF is a service provided by Bloomberg Finance
LP and its affiliates.
Speaker 1 (22:55):
This recording does not constitute, nor should it be construed
as investment advice, investment recommendations, or a recommendation as to
an investment or other strategy.
Speaker 3 (23:04):
Bloomberg ANIAF should not be considered as information sufficient upon
which to base an investment decision.
Speaker 2 (23:09):
Neither Bloomberg Finance LP nor any of its affiliates makes
any representation or warranty as to the accuracy or completeness
of the information contained in this recording, and any
Speaker 3 (23:18):
Liability as a result of this recording is expressly disclaimed
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