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Companies line up as Germany gives €1bn in battery cell subsidies to counter China's might

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A Volkswagen badge on a production line at the Volkswagen plant in Wolfsburg, Germany. Photo: Reuters/Fabian Bimmer

The German government is putting up €1bn (£870m, $1.1bn) in subsidies to support national companies developing battery cell production in Germany, and national carmakers are keen for a slice of the money.

More than 30 companies have already applied for subsidies, Reuters reported on 18 March. Germany’s economy minister Peter Altmaier said the response “has far exceeded our expectations.” The government could decide how to allocate the aid by this summer.

Volkswagen (VOW.DE) is among the big names applying for the state support, as are BMW (BMW.DE), chemicals giant BASF (BAS.DE), and battery maker Varta (VAR1.BE). Reuters’s sources said that up to six consortiums could be formed, which may also include French and Polish companies.

Automobile production is moving into the highly competitive era of electric cars and the German government is concerned that the country’s mighty automotive industry may become too heavily reliant on battery makers from China, South Korea, and Japan.

China’s biggest battery maker, Contemporary Amperex Technology (CATL), was given approval to build a giant battery cell factory in the German state of Thuringia in July 2018, which is slated for completion in 2021. Daimler (DAI.DE) has already signed a multibillion-euro battery contract with CATL, and BMW said it would buy €4bn (£3.4bn, $4.5bn) worth of battery cells from the new factory.

Germany’s largest automotive supplier Bosch announced last year it would not go ahead with battery-cell manufacturing for economic reasons.

“For Bosch, it’s important to have a technical understanding of cells,” Rolf Bulander, a member of Bosch’s management board, said at the time. “We don’t have to make them ourselves.”

Considering that the battery is by far the most expensive component of an electric car, it benefits German carmakers not to be completely dependent on Asian producers. The government has been voicing concerns for months about Germany falling behind on this essential technology.

German Chancellor Angela Merkel urged companies in September 2018 to get serious about developing battery cells, noting, “I believe that will be extremely important in the next decades.”