BASF bets on battery making in the high-growth Europe market
London — BASF is prepared to dig deep, pouring money and expertise into developing materials for electric-vehicle batteries to catch up with rivals like Tesla supplier Sumitomo Metals & Mining Co.
The world’s number one chemical maker is adding to its expansion plans in Europe, which is emerging as the next high-growth region for batteries, said Ken Lane, BASF’s global head of catalysts. Battery makers in the market currently rely on Asian suppliers such as Sumitomo that provide nickel and lithium.
"We are the largest chemical supplier to the automotive industry, and this is the biggest opportunity that we see in that space today," Lane said in a phone interview. "Asia has been the growth story till now and will continue to grow, but Europe is also going to be growing very fast over the next decade."
The company plans to build a €400m factory in Europe to make cathodes from a concoction of elements that determine the battery’s strength and lifespan. Work has yet to begin on the plant, but BASF is already looking ahead to additional projects.
The splurge is part of an arms race to scale up output of cathodes to meet demand at a reasonable cost. The UK’s Johnson Matthey is investing as much as $270m, and Belgium’s Umicore is spending more than $350m on its South Korean operation as it seeks to stay ahead of the competition.
BASF rose 2.2% to €98.31 as of 10.24am in Frankfurt trading, after the company released early its annual earnings late on Thursday. Profit soared to a five-year high, beating analyst estimates.
BASF will "position itself with assets" in Europe, Lane said, declining to give details. As well as increasing capacity to deal with a ramp-up in electric-vehicle production, having operations on the ground helps attract and retain the scientists needed, which is currently "very difficult", he said.
Suppliers and car makers alike are honing plans to meet stringent emission regulations in Europe that have triggered record spending to develop battery-powered model line-ups. The shift to electric vehicles has been a learning curve for parts makers and vehicle companies alike, which have struggled with the high cost of batteries and unattractive products failing to rouse much of a consumer response.
BASF bought patents and battery material technology in 2008 and opted to largely focus on cathodes, the key battleground for battery performance. Amid hype over different types of chemistry, coupled with lofty ideals for an electric car that recharges in the time it takes to drink a cup of coffee, BASF spent its first years "feeling its way", said Lane. Later, a partnership with Toda Battery Materials gave it vital manufacturing knowledge and a more solid footing to compete with Nichia, China’s Ningbo Shanshan, Umicore and LG Chemical.
Global sales of battery vehicles — both plug-in hybrids and wholly electric cars — are expected to reach eight-million units in 2025, up from about one-million in 2017, according to Liberum analyst Adam Collins. While most car makers plan to introduce electric models from 2019, moves for a battery-cell industry in Europe have remained vague amid previous failed attempts.
Evonik Industries, the specialty chemical maker, exited its battery venture Li-Tec in 2014, selling its stake to Daimler. Demand for electric vehicle demand wasn’t sufficient and keeping up with the industry’s rapid development carried too much risk, the company said at the time. Daimler ceased making cells a year later.
"It’s the chicken-and-egg thing here," said Lane. "If you don’t have the materials, you’re not going to have the batteries."
BASF hopes decades of experience with precious metals, key to catalysts used in combustion engines and petrochemical plants, will help make its push successful. The 152-year-old manufacturer has also formed partnerships, including the TODA venture and taking a stake in Sion Power to access lithium sulphur batteries.
Mastering large-scale production and working with specific customer formulae on battery materials will be crucial to winning the battle, Lane said. The company has research centres in Germany, the US, Japan and China is focusing on nickel-rich cathodes — betting this type of chemistry will win out against competing formulae simultaneously in development.
"One of the benefits BASF has is that we are able to commit to these kinds of investments that are still high risk and still developing," Lane said. "We are thinking about the next 50 years, not the next five years."