Automakers Accelerate Electric Vehicle and Battery Production

Northvolt is six-years-old. But with funding from Volkswagen and Goldman Sachs, it is becoming a serious player in the electric vehicle battery production market. It is building a new plant in northern Germany that will supply Europe. The goal is to start cranking out lithium-ion batteries by 2025 at 60 gigawatt-hours per year — enough to build 1 million electric vehicles. 

The European Union is phasing out the internal combustion engine by 2040, while the Biden Administration wants half of all U.S.-sold vehicles to run on electricity by 2030. If electricity can replace gasoline, that would help countries meet their climate goals.

In the United States, General Motors, Ford Motor Co., and Stellantis support President Biden’s initiative. In Europe, policymakers have approved granting $3.5 billion under the European Battery Innovation project to move away from fossil fuels, including developing rare earths. Among the companies in line to get funding are Fiat Chrysler, BMW, and Tesla, along with Arkema, Borealis, Enel X, Solvay, and Sunlight Systems.

Electric vehicles comprise 2% of the global car market. The U.S. Energy Information Administration projects passenger vehicles, fleets, and smaller trucks that use electricity and gas to grow from 1.31 billion vehicles in 2020 to 2.21 billion by 2050. It estimates that hybrids will make up 34% of cars in developed countries and 28% in emerging economies by 2050. 

As for Northvolt, the German factory would be its third. It also announced two others that will go up in Sweden in 2024 and 2025. The company says that its latest facility will have several critical advantages. It is centrally located, and it is connected to one of the cleanest energy grids in Europe — powered by onshore and offshore wind energy. The plant is expected to leverage economies of scale to reduce battery costs.

“It matters how we produce a battery cell,” says Peter Carlsson, Northvolt’s chief executive, in a statement. “If you use coal in your production, you embed a fair amount of CO2 into your battery, but if we use clean energy, we can build a very sustainable product. Our philosophy is that new energy-intensive industries, such as battery manufacturing, should be established in actual geographical proximity to where the clean energy is produced.”

Driven by Decarbonization 

The push to decarbonize is prompting other automakers to take similar steps. Mercedes-Benz is working with Envision AESC to produce electric batteries by 2025. The Mercedes-Benz plant in Tuscaloosa, Alabama, has been the production plant for large sport utility vehicles since 1997. The same plant will now be producing all-electric vehicles. The automaker says that it will invest at least $46 billion by 2030 into the development of electric vehicles. 

Meantime, Ford is building a battery factory in Turkey that will be done by 2025. It is also building one in Germany, which will produce 1.2 million vehicles over six years, with a total product investment of $2 billion. Ford says it will introduce three new electric passenger vehicles and four new electric commercial vehicles in Europe by 2024; it plans to sell more than 600,000 electric vehicles in the region by 2026. It is all part of Ford’s effort to achieve zero emissions for all vehicle sales and carbon neutrality across European by 2035.

And Tesla has a gigafactory in Shanghai, China. It expects to build 500,000 cars a year. It also has a lithium-ion battery factory in Nevada and is building one in Germany. It will produce batteries, battery packs, powertrains. Gigafactories are also under construction in Austin, Texas. 

Tesla says that it expects to sell 20 million electric vehicles by 2030 — a company that thinks it can recover 92% of a battery’s materials. Fossil fuels are extracted and used once; it notes that the lithium-ion battery materials are recyclable. Once the raw materials are in the lithium-ion cells, it says that they will remain there until the end of the car’s life. Tesla says recycling is much less than purchasing raw materials on the open market to build new batteries.

“The opening of our new battery plant in Alabama is a major milestone on our way to going all-electric,” says Ola Källenius, Chairman of the Board of Management of Mercedes-Benz Group AG. “With our comprehensive approach including a local cell sourcing and recycling strategy, we underline the importance of the U.S., where Mercedes-Benz has been successful for decades.”

“Our march toward an all-electric future is an absolute necessity for Ford to meet the mobility needs of customers across a transforming Europe,” adds Stuart Rowley, chair, Ford of Europe. “It’s also about the pressing need for greater care of our planet, making a positive contribution to society and reducing emissions in line with the Paris Climate Agreement.”

The advisory firm Wood MacKenzie says that electric batteries will hit an inflection point in 2027 — the place where the economies of scale are at that place in which price and quality are getting better at an expedited pace. The electric vehicle rollout will then be unstoppable.

The auto industry is gearing up to produce an increasing number of electric vehicles — a product of the globe’s decarbonization goals and the improving economies of scale. It means developing clean energy and new jobs tied to battery production. Ford, Mercedes, and Volkswagen are helping to lead the charge, but more carmakers and companies will enter the fray.