For several months now, Europe has been increasingly concerned about the unstoppable advance of China in the electric mobility sector, particularly in the battery market, where it has established itself as a leader.
In this context, Francisco Carranza, CEO of Basquevolt, articulates the situation in a dialogue with Mobility Portal Europe:
“We cannot continue to launch factories recklessly when demand does not align with installed production capacity.”
And he adds: “What we need is a differentiating technology that justifies new investments.”
In this regard, he states that the industry is largely dominated by Chinese players, primarily because “its government has intensively promoted this sector for over 15 years.”
As a result, China currently leads a battery segment that, according to Carranza, has transformed into “a commodities market,” where the priority is to produce at the lowest possible cost.
Indeed, according to a study by CnEVPost, during January-March 2024, Asian companies occupied the top five positions in the global market share of batteries for electric vehicles.
Specifically, Chinese firms CATL (37.9 per cent) and BYD (14.3 per cent) were the largest producers.
In this scenario, competing on price is a lost battle for Europe, where production costs are higher.
So, what should the continent do to differentiate itself? According to Carranza, the only path forward is innovation.
That is why he emphasises: “In Europe, we cannot compete solely on price; we must excel technologically.”
“We need to develop a more efficient and cost-effective solution that can compete with Chinese products not just by being cheaper, but by being intrinsically better,” he says.
In this regard, the CEO of Basquevolt highlights that the continent possesses certain competitive advantages.
What are they?
Leading universities and research centres, along with a consumer society with high purchasing power, are factors that could drive the industry forward if properly aligned with technological innovation.
This approach is supported by Fernando de Góngora, representative of China EV100 in Spain, who points out that Europe must learn from the strategy employed by the Asian country.
“We need to do what China did: observe what they are doing and replicate it here,” he explains.
For de Góngora, the key lies in fostering innovation and reducing reliance on excessive regulation.
“Europe has been introspective, confident in its leadership in the traditional automotive sector, while China has been quietly working to dominate future technologies, including batteries,” he stresses.
However, this is not the only challenge the continent currently faces.
The paralysis of battery projects is a reality in Europe
In recent years, the capacity for battery production has significantly increased, resulting in notable overcapacity in the sector.
This situation has exerted considerable pressure on prices.
The reason? Supply far exceeds demand, forcing manufacturers to lower prices to maintain competitiveness in the market.
“The current global production capacity is three times greater than demand, which has significantly increased pressure on all cell manufacturers,” asserts Carranza.
In this context, Europe finds itself at a crossroads.
Projects for new factories, such as those of Automotive Cells Company (ACC), a joint venture between Stellantis, Mercedes-Benz, and TotalEnergies, are being reviewed or even halted due to global overproduction of batteries.
ACC, which had plans to build three gigafactories on the continent, has decided to pause construction on one of its plants in Germany due to market slowdowns.
Industry experts warn Mobility Portal Europe that “investments can no longer be planned with the same time horizon as before.”
Moreover, the rapid technological evolution of the sector necessitates reassessing projects before they become obsolete.
The recent advancement by the Chinese startup Greater Bay Technology, which has developed a thermal management system for batteries that allows for a range of up to 1,000 kilometres, exemplifies how China continues to lead in innovation.
In this context, industry insiders caution that if ACC and other European companies fail to develop disruptive technology, “everything they are planning here will be a wasted investment.”
In this regard, Carranza maintains: “We cannot continue to launch factories recklessly when demand does not align with installed production capacity.”
“What we need is a differentiating technology that justifies new investments,” he adds.
This is because the challenge is technological, not just economic.
If Europe does not accelerate the pace of innovation, it is likely that projects that currently seem promising will become obsolete before the factories are operational.
Nevertheless, the key is to avoid panic while re-evaluating investment strategies.
Therefore, it is essential for Europe to continue investing in technologies that can keep pace with the advancements made by the Asian country.
“The Chinese advance is unstoppable if we do not promote innovation,” asserts Góngora.
