Billions are being invested: the Chinese rely on German batteries

Billions are invested
The Chinese rely on German batteries

By Marcel Grzanna

The Chinese battery manufacturer Svolt wants to invest billions in new factories in Saarland and relies on the quality of German employees and machines. Svolt European boss Wollenhaupt is certain: The fall in battery prices will massively increase the demand for e-cars in this country.

Hard to believe, but Germany is slowly but surely becoming a popular location for battery production for electric vehicles. Daimler has started manufacturing its own high-performance battery systems in its traditional plant in Hedelfingen, Volkswagen is investing in Salzgitter in the production of sustainable solid-state batteries, Porsche wants to build a battery factory for high-performance cells in Tübingen, and Opel parent Stellantis wants to produce in Kaiserslautern in the future.

For two Chinese companies, the prospect of local self-sufficiency for German automobile manufacturers is apparently no obstacle to realizing big plans in this country. After CATL in Thuringia, another major producer from the People’s Republic, Svolt in Saarland, wants to invest billions in its expansion in Europe. There is talk of up to two billion euros in Saarland, with CATL it should be around 1.8 billion euros. “We see some very innovative companies in Europe, which we do not regard as competitors, but rather as market companions,” says Svolt European boss Kai-Uwe Wollenhaupt in an interview with “Healthy competition is important to drive innovations in the areas of range, fast charging, sustainability and safety.”

But competition is also the reason why the prices of batteries are falling continuously. A few years ago car manufacturers were still paying several hundred euros per kilowatt hour of output; today it is only around 100 euros. Trend: falling further. “We are assuming that in 2025 there will be cost parity between conventional combustion and battery-electric vehicles without CO2 emissions – at 65 euros per kilowatt hour,” says Wollenhaupt. That sounds like a declaration of war for an already highly competitive market.

But does such a large investment really make sense given falling prices and increasing competition? Or is it really an incalculable risk for companies? No, means Wollenhaupt. Because the calculation looks different: The falling prices for the kilowatt hour will further increase the demand for e-cars because they will in turn become cheaper for the consumer. The battery manufacturers will then generate the necessary sales through the bulk. Wollenhaupt is certain: “The needs of the automotive industry in the coming years will be enormous. Svolt batteries alone will not be able to meet this demand.” Annual production capacities of 24 gigawatt hours are to be created at two locations in Überherrn and in Heusweiler, 30 kilometers away. Up to 500,000 electric cars could be equipped with it.

Subsidies help

People in Saarland are happy to have landed a big fish with the Chinese company. Dozens of other locations on the continent had been examined by the Chinese for the cell factory on the one hand and pack and module production on the other. Among other things, the geographical location with its proximity to France, where the Stellantis brands Citroën and Peugeot are located, spoke in favor of the Saarland. Lavish subsidies are probably another reason.

Competitor CATL collects 13.5 million euros from the state of Thuringia alone for its commitment. How high the subsidies will be for Svolt has allegedly not yet been finally decided, as announced by the Saarland Ministry of Economics. One thing is clear, however: Svolt benefits from GRW funding for structurally weak regions, among other things. The funding is linked to legally binding conditions to create and secure permanent jobs. In Saarland it should be up to 2000. In addition, the company can look forward to possible tax breaks, good conditions for building loans and when buying or leasing real estate.

Here, too, the company benefits from the concession of the Saarland state government, whose structural holding company Saar bought the land for use by Svolt in order to save the investor time and effort. It is apparently still unclear whether Svolt will later act as a buyer or leaseholder of the building land. “At the moment, the various agreements for the further specification of the project and the contractual arrangement are being coordinated,” explains a ministry spokesman. The corresponding model will be developed taking into account all requirements and framework conditions that result from the funding guidelines, state aid and competition law as well as the requirements of the investors.

Funding, geographic location and the relative proximity to the headquarters of numerous European car manufacturers might be reasons enough for an investment in German soil. Companies in all sectors are also happy to take up the argument of short distances to reduce emissions. But actually that’s just a pleasant side effect of strategic considerations. Chinese companies must also take precautions if the trade dispute escalates further and exports from China to Europe may become more difficult – they too must secure supply chains and become more flexible regionally.

“Good level of education”

“One of the greatest advantages of Germany as a location is the good level of training available to the workforce,” says Bernard Bäker, Professor of Vehicle Mechatronics at the TU Dresden. The Chinese have good expertise in cell chemistry, but “if you are producing in high volumes, you need a special reputation in production technology that leaves little margin of tolerance for errors.” Here the Germans are still clearly superior to the Chinese. Acceptable component tolerances in the production batches of the cells are “extremely important”. The researchers found production-related differences in cell capacities of several percent. One of the decisive factors is the quality of the electrodes used, which influences the load capacity of the cells and thus their quality over the operating time.

Wollenhaupt can confirm this in practice. “In order to produce a good battery cell, around 3500 different parameters have to be taken into account, which is why highly qualified employees and high efficiency are extremely important,” says the Svolt European boss. According to Bäker, the manufacture of batteries is at least as complicated as the construction of microchips. The success of Svolt in Saarland should therefore also be measured internally using the so-called reject rate, the same amount of batteries that do not achieve the optimum quality due to errors in production and later have to be sold for less. The manufacturers of electric cars are given preferential treatment because their engines have to be powered by top batteries because of the high load. Electric lawnmowers or electric ships, which are used significantly less than cars, can, on the other hand, be equipped with less resilient batteries.