Europe’s battery strategy: time for a rethink
The European battery companies are at a crossroads.
Welcome back to another edition of my newsletter! - Week 18 2025
This week, I'll explore the challenges facing European battery companies and examine how Asia, particularly China, might offer a path forward.
Summary
The highlight of the week: the European battery companies are at a crossroads.
Battery Industry Pulse: Weekly Roundup.
The highlight of the week: the European battery companies are at a crossroads.
Another European battery company has fallen.
CustomCells has filed for insolvency. The main reason is its largest customer, Lilium, which also filed for insolvency a couple of months ago. Lilium operated in the eVTOL field, a very risky industry. This industry is not yet ready.
“The financial difficulties at CustomCells stem primarily from the insolvency and payment default of its largest customer, aerospace company Lilium. Outstanding receivables in the tens of millions of euros remained unpaid and could no longer be absorbed. Despite promising business developments, no new investors with sufficient capital were secured in time to offset these losses, due in part to the current challenging macroeconomic environment” - CustomCells
Three mistakes were made by CustomCells:
Rely too heavily on a large customer, even though they have worked with 500 customers since their founding (according to CustomCells).
Their largest customer was working in the eVTOL industry
They extended too much credit to Lilium. As a former credit manager, I know small or risky customers need prepayment or only a small line of credit.
In conclusion, CustomCells made management mistakes.
CustomCells’ insolvency follows Northvolt’s bankruptcy. Northvolt made different strategic and management errors. They burned 15 billion euros to build a 16 GWh plant in Sweden, then ran out of cash.. They stayed in the valley of death for too long. They had too much scrap. According to Fraunhofer, each percent of scrap rate costs about 30k euros a day. It's about 10 million euros a year.
At the same time, Automotive Cells Company, ACC, is now struggling to ramp up cell production.
“We’re in a period until mid 2026 where we’ll receive all the blows but not yet reach full turnover,” Yann Vincent, chief executive of ACC said, adding that the company needed to cross this “valley of death”. (from Financial Times)
To do so, ACC is in discussion with an unnamed “Chinese partner” to learn from its production processes and accelerate efforts to catch up, Yann Vincent said (From Financial Times).
On LinkedIn, someone suggested outsourcing electrode manufacturing as a solution. Electrode manufacturing is a critical and challenging step in battery cell production. It’s a trending strategy, but I’m a bit skeptical. First, your entire production will depend on an external provider. Second, you won’t learn the process if you don’t do it yourselves.
We must be honest with ourselves, Europeans. There’s a lack of skilled workers who know large-scale cell production in Europe. Even when Korean battery companies built factories here, they struggled to ramp up production. They know how to scale, but that expertise resides in people. They had to bring staff from Korea to solve issues in Europe.
We already have battery plants (LGES in Poland, SK On and SDI in Hungary, CATL in Germany) and more under construction, like CATL and EVE Energy in Hungary.
That’s great.
But let’s be more ambitious! We need European champions. There were three potential leaders: Northvolt, ACC, and PowerCo. Only ACC and PowerCo remain, and ACC is struggling.
We do have European battery-materials firms like Umicore and smaller players. Umicore faces financial challenges, and startups aren’t at scale yet.
Europe lags behind China, Korea, and Japan in battery innovation and industrialization.
In recent weeks, CATL and BYD have been making strides in innovation, unveiling advancements like fast-charging and sodium-ion batteries, among others.
What if the future of European battery companies relies on China?
More than twenty years ago, foreign automakers wanted to enter China because of the potential market (more than 1 billion people live in China). China agreed, but only on one condition: vehicles would be produced through a joint venture with a Chinese partner. China did not know how to build cars. Foreign automakers transferred technology (and also had strategic information stolen by the Chinese).
Today, China dominates its EV market with companies like BYD, Geely, BAIC, and SAIC. The foreign automakers are in big trouble, facing volume and profit declines.
My proposal is to use more joint ventures in Europe’s battery industry (same for the EV industry).
Currently, few JVs exist for cell production in Europe. In the USA, the situation is reversed, as most automakers form JVs with Korean battery makers, for example, LGES with GM, Ford with SK On, or Stellantis with Samsung and LGES.
There are two paths:
Soft approach: find a Chinese partner and build a battery plant in Europe. Two projects already exist, CATL and Stellantis in Spain, and Inobat and Gotion in Slovakia.
Hard approach: In today’s tense geopolitical conflict between China and the USA, Europe should leverage its market access and require technology transfer to occur in Europe between European and Chinese firms.
The hard approach may seem difficult, but Europe must wake up.
European companies are losing competitiveness in major industries like automotive and chemicals.
Why aren’t we collaborating with Korean or Japanese companies?
Korean companies already have a strong foothold in Europe, with large facilities in operation. For example, LG Energy Solution’s plant will have an annual capacity of 115 GWh at the final stage. They pioneered large-scale operations in Europe, and if they need more capacity, they will expand their existing sites. They are now focusing on the U.S. as Chinese battery makers face hurdles there.
Japanese firms are led by Panasonic. Panasonic focuses on Japan and the U.S., and has a small customer base, with Tesla as its largest partner. Panasonic is more cautious about capital deployment than Korean or Chinese firms, and I do not foresee it expanding into Europe.
One thing remains an issue in Europe is Europe.
Europe has its own problems. Member states often compete rather than collaborate. The European Parliament and Commission are overly bureaucratic, with slow and risk-averse decision-making. They favor regulation over creating dynamic business environments.
European battery and battery-materials companies, especially startups, lack funding and access to capital. Europe needs substantial investment in R&D and a clear short, mid, and long-term strategy.
Mandating only zero-emission vehicle sales after 2035 is not enough without concrete industry support. Existing aid packages lack clarity and are bogged down by bureaucracy., In contrast, the U.S. Inflation Reduction Act is straightforward, and some projects have already shifted from Europe to the U.S.
Europe is at a critical stage where tough decisions need to be made for Europe to stay competitive in major industries and become competitive in emerging industries (eg. battery industry).
Now, let’s look at this week's battery market developments.
Battery Industry Pulse: Weekly Roundup
Raw Materials
Albemarle CEO says ‘math doesn’t work’ for US lithium refinery project
Northern Graphite’s Quebec mine faces shutdown without funds
American Battery Technology receives $900 million loan interest for lithium mine project
Components
Battery
CATL became the first company to meet the Chinese “No Fire, No Explosion” battery standard
BMW completes central battery assembly factory building in Bavaria
Battery Equipment
Battery Recycling
BESS
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@Christopher i'd be happy to spend a bit of time explaining European electrode Manufacturing as a service. in a nutshell, electrode manufacturing resembles the flexible packaging industry's business model catering to the food, cosmetics, and pharmaceutical industries, in more than one aspect. Gigafactories in this context are an "Entremont Factory" producing it's own packaging materials for grated cheeses. Or Nestlé, coating, cutting and stamping alu-foil for coffe-capsules. OEM are good in automation, and assembly, not in conversion. Chinese operate in the same way, to launch product for example. They don't build a new Gigafactory for each iteration. And they come up with "new specs" every 6 months. None of these has Gigafactory volumes. There is one factory that coats (all chemistries, several coating lines) and there are several factories that assemble. The ratio coating to assembly can be 1 to 10/20 assembly factories, maybe even more. Metal-foil coating remains a speciality in Eastern and especially in South-Eastern Europe, while "pockets of competence" still exist in Italy, Spain, Netherlands, Germany. Why ? they didn't delocalize, because they are and remain "cheap". As an example the largest Tetrapak factory in Europe using coating and extrusion coating technology is in Serbia (Gornij Milanovac). It's important to note that they didn't bring it there, it was there, because ex-Yougoslavia, together with Eastern Ukraine, and some locations in Slovakia, Poland and Hungary, where the Metal-foil conversion specialist's during the administrated economy. The "problem" with "Gigafactories" is 2fold a. all compentency fields must be aligned, to "resonate" for optimal yield. b. an authentic "cognitive-bias" -- our asian friends will let us make all the mistakes, and even some more. Let's meet, i can explain, show the rationale and show how splitting the Gigafactory can actually speed up the process acquisition, offer product design flexibility, without impacting quality negatively, on the contrary.
Heavy industry doesn’t have a place in Europe. European economies should focus on services.