The FDI angle

• Western automakers delay or cancel $13bn in gigafactory investments amid weaker EV demand.
• $27bn of battery cell plants also scrapped in Europe and North America due to market slowdown.

Why it matters: A pullback in investments signals the difficulties in developing Western battery supply chains able to compete with China.

Western automakers have suspended or cancelled six joint venture projects with battery partners worth at least $13bn of direct investment in gigafactories in Europe and North America, as the industry adjusts to weaker electric vehicle (EV) sales, Chinese competition and the reality of building expensive gigafactories.

Based on calculations combining company figures with data from greenfield investment monitor fDi Markets, these investment plans account for about 8% of the $157bn worth of total FDI pledged to battery production projects across Europe and North America between 2019 and 2023. 

Magnus Bekker, a battery supply chain consultant based in Ho Chi Minh City, Vietnam, says that there’s a “huge disconnect” between the ambitions and ability of planned Western projects to deliver batteries that are able to compete with Chinese battery producers on price. Many companies announced investment plans as part of a “huge scramble for available funding … without proper business plans or offtake agreements,” he says. 

Automotive Cells Company, a battery joint venture (JV) backed by automakers Stellantis and Mercedes-Benz, suspended plans in June 2024 to build factories in Termoli, Italy and Kaiserslautern, Germany. Both projects had a pledged capital expenditure of €2bn. “We are going to adjust our investment plans on EVs to the pace at which market sales of EVs grow,” Stellantis CEO Carlos Tavares said in a press briefing at the time. 

In November 2023, US automaker Ford decided to scrap two separate JVs in Turkey’s capital Ankara with Korean battery makers SK On and LG Energy Solution, with estimated capital expenditure of Won4tn ($3.09bn) and Won3tn, respectively. Ultium Cells, a battery JV in the US between General Motors and LG Energy Solution, has halted construction of its $2.6bn EV battery plant in Michigan. Farasis Energy, a Chinese battery maker which has entered a JV with Mercedes, has suspended its plans to invest €600m in a battery plant in Bitterfeld-Wolfen, Germany.

These scaled-back investment plans come amid signs of weaker-than-expected EV demand. Data from Rho Motion, an EV research consultancy, shows that year-on-year growth of EV sales slowed to 32% in 2023, down from 59.6% in the previous year and 101% in 2021. This year, Rho Motion forecasts global EV sales to grow by about a fifth, followed by another 24% of growth in 2025. 

The full impact of EV market troubles on investment plans extends beyond just automaker JVs. Planned battery cell plants worth at least $27bn have been cancelled in Europe and North America in recent years, according to fDi research, including failed battery start-ups like Britishvolt and Italvolt, as well as struggling companies such as Norway’s Freyr and Sweden-based Northvolt, which is currently Europe’s best chance at a homegrown battery champion.

“Everybody jumped on the bandwagon having seen the success that Northvolt had in raising money in Europe. The issue is a lot of these projects were really never going to happen,” says Andy Leyland, managing director of SC Insights, a lithium-ion battery research consultancy. 

Northvolt, which has raised $15bn of capital, has delayed plans to build three more gigafactories, including its JV with Volvo Cars in Sweden and other plants in Germany and in Quebec, Canada. As part of cost cutting measures announced on September 9, Northvolt said it would focus on large-scale battery cell manufacturing and step back from plans to produce cathode active materials in Borlänge, where it has sold its site. 

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The great resource disconnect puts EV targets at risk

Data from CRU Group and fDi research indicates that at least $4.2bn worth of cathode and precursor projects have been delayed, suspended or cancelled due to the slowdown. In August, construction was halted at a cathode active material plant joint venture in Bécancour, Canada in response to Ford’s change in EV production plans and targets.

Producers of EV battery anode materials in Europe have also left the market altogether due to lower-than-expected demand. SGL Carbon, a German manufacturer of carbon and graphite products, said in July 2024 that it will discontinue development of its graphite anode material business as Europe did not have as many battery manufacturers as they once expected.

“Currently, everyone is leaving Europe, I don’t know many of the [battery] projects. Most went bankrupt or left the country to Canada or [the] US. This is the reason why we closed down the laboratory in Meitingen” said Torsten Derr, SGL Carbon’s CEO, in a call with investors on August 8. The company also closed its battery materials activities at its two sites in Poland.

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