[Energy-topia] Now Is Not the Time to Stop Battery Investment

French battery startup Verkor has secured 1.3 billion euros (approximately 2 trillion KRW) in funding from the financial sector this month. This capital will be invested in the construction of a battery factory in Dunkirk, northern France. Scheduled for completion in 2025, the factory will produce batteries with an annual capacity of 16 gigawatt-hours (GWh), enough to supply 200,000 electric vehicles. The total investment for building this factory has increased to 3 billion euros (approximately 4.4 trillion KRW).

Verkor's new fundraising has attracted attention because recent analyses suggest that the electric vehicle market is currently facing a chasm, indicating a temporary slowdown in growth. As the previously rapid growth of electric vehicles slows, several automakers such as Ford have announced plans to reduce their investments in electric vehicles. Domestic battery companies like LG Energy Solution and SK On have also hinted at slowing their investment pace.

Despite this uncertainty, Verkor was able to attract funding from banks, reportedly due to the strong commitment of French President Emmanuel Macron. Thanks to this, 16 major French commercial banks and 3 public financial institutions have participated in the loan. France's decision to invest heavily in building new battery factories despite the chasm debate is aimed at maintaining competitiveness in the battery industry, which is crucial for electric vehicles. Europe is concerned about its dependence on Asian countries, especially China, for electric vehicle batteries.

In fact, Chinese companies such as CATL and BYD are expanding their overseas investments regardless of the chasm debate. Chinese battery firms are focusing on Europe instead of the United States, which is constrained by the Inflation Reduction Act (IRA). According to Chinese local media, CATL plans to establish a joint factory with Stellantis in Spain and build a cathode material factory in Morocco, in addition to the six already known locations.

CATL's founder and CEO, Zeng Yuqin, is said to be personally leading the overseas expansion. In an email to employees, CEO Zeng stated, "Although the international situation will change rapidly in 2024, the trend toward new energy is an international consensus, and temporary uncertainties will present opportunities to those who can seize them."

It is even questionable whether the electric vehicle market is truly in a stagnation phase. According to Bloomberg, in the first quarter of this year, three companies in the U.S. electric vehicle market?Tesla (-13.3%), GM (-20.5%), and Volkswagen (-12.2%)?recorded negative sales compared to the previous year. However, six out of the top ten companies, including Hyundai-Kia (56.1%), Ford (86.1%), Rivian (57.8%), Mercedes (66.9%), BMW (57.8%), and Toyota (85.9%), achieved growth rates exceeding 50%.

Market research firms predict that the electric vehicle market will grow by 15-20% this year. Although this growth rate appears smaller compared to the rapid expansion seen in recent years, it is by no means a low figure. The International Energy Agency (IEA) projected in its ‘Global EV Outlook 2024’ report published last April that if the targets announced by various governments are met, two-thirds of vehicles sold in 2035 will be electric vehicles.

Over the past several years, the battery industry has grown rapidly, attracting numerous companies to enter the market. Many of these companies are expected to be naturally weeded out during challenging times like the present. CATL’s aggressive overseas expansion is a strategy to turn crisis into opportunity and secure a solid competitive advantage. Korean battery companies have reached their current positions after numerous trials and tribulations since entering the market in the 1990s. As with semiconductors and displays, it is hoped that through bold decisions and investments, they will advance in the global competition.

This content was produced with the assistance of AI translation services.