The deal will allow the Italian-based automaker to make cheaper batteries and more affordable electric vehicles.
Europe’s carmakers are investing billions of euros to build battery plants on home turf, aiming to cut the cost of producing EVs and reduce dependency on suppliers in Asia.
A key goal of Stellantis, which was formed in early 2021 through the merger of Fiat Chrysler and Peugeot maker PSA Group, is to shift to a fully electrified lineup across all 14 brands by 2030. The company also plans to develop a new generation of plug-in hybrids by 2025, which could combine traditional gasoline engines with electric motors.
Under the MoU, CATL will supply lithium iron phosphate (LFP) battery cells and modules to power Stellantis EV production in Europe. The two companies will also jointly investigate opportunities to expand the partnership beyond the current scope of the MoU. They will work to develop a bold technology roadmap, as well as identify and evaluate potential projects to strengthen the battery value chain.
The agreement is the fourth significant investment by a foreign battery manufacturer in Hungary. South Korean battery maker SK On is building a 30 gigawatt-hour (GWh) plant in Ivancsa to the south of Budapest, and Chinese manufacturer Contemporary Amperex Technology Co Ltd (300750. SZ) is set to open a plant there by 2022.
LFP batteries have gained traction among automakers, who find them cheaper and more stable than nickel-based cells widely used in most EVs. However, they still have lower energy density than a full battery. LFP manufacturers say they can improve the chemistry to increase energy density.
fDi analyst Evan Hartley says the Debrecen plant will help Europe secure much-needed Tier 1 cell production capacity. He notes that the facility is located near auto plants of CATL customers such as Mercedes, BMW, and Volkswagen. He says the deal shows that Hungary and Eastern Europe are establishing themselves as a regional hub, helping attract upstream cathode producers and downstream EV automakers.
The CATL deal is the latest sign that the European market is becoming a priority for China’s battery makers. The region’s low-carbon policies, stricter air quality standards, and skilled workforce are among the factors driving investment, as are cheap land and labor compared with Western Europe.
The deal with Stellantis will be the largest by CATL in Europe. The company is also building three EV battery factories in Europe — one each in France, Germany, and Italy via a joint venture with Mercedes and TotalEnergies called ACC, and another in the US with Samsung. It’s part of a more significant push to reduce carbon emissions. Several countries in the EU and Latin America have committed to going carbon neutral by 2050. In July, Mercedes, the biggest carmaker in the world by volume, updated and accelerated its plans to make its entire lineup of cars and SUVs fully electric by 2030.
