Stellantis and Catl strike European LFP deal

Franco-Italian automotive conglomerate Stellantis has signed a non-binding agreement to source lithium iron phosphate (LFP) batteries from Chinese global battery market leader Catl as part of a proposed 50:50 joint venture (JV) between the two firms.

The move reinforces Western OEM willingness to work with the Chinese firms that lead on LFP technology, even given growing political concern on both sides of the Atlantic about Chinese dominance of key parts of the battery supply chain, and efforts by non-Chinese battery makers to catch up on LFP.

According to the International Energy Agency, “around 95pc of the LFP batteries for electric LDVs went into vehicles produced in China, and Chinese OEM BYD alone represents 50pc of demand”.  Last week, South Korean battery firm SK On, a long-time battery partner of Western OEMs, announced a collaboration with German chemicals company BASF to make LFP cells.

Stellantis and Catl have signed a non-binding memorandum of understanding (MoU) “for the local supply of LFP battery cells and modules to power Stellantis’ electric vehicle production in Europe”. The European politicians holding the purse strings on financial incentives towards building a domestic LFP value chain in Europe could, though, question the efficacies of such subsidies if production relies on a Chinese firm’s knowhow.

 “The MoU outlines a long-term collaboration between Catl and Stellantis on two strategic fronts: building a bold technology roadmap to support Stellantis’ cutting-edge battery electric vehicles and identifying opportunities to further strengthen the battery value chain,” the firms say.

Price advantage

While the automaker has not yet confirmed any details of the potential JV, CEO Carlos Tavares’ mentions of “protect[ing] freedom of mobility for the European middle class” and “accessible battery technology” suggest that Stellantis is aiming to leverage Catl’s more affordable LFP technology to bring lower cost EVs to the European market.

“Featuring a long service life and high thermal stability, LFP technology can enable Stellantis to offer high-quality, durable, and affordable EVs in passenger cars, crossovers and SUVs in the B and C segments,” the automaker says.

“Using nickel manganese cobalt (NMC) in the cathode is going to naturally increase the direct supply costs of the overall individual battery manufacture vs a LFP battery. Sourcing both cobalt and lithium are very costly, so you need to consider other trade-offs for the cost” explain Stuart Cooper, battery consultant at Strativ Group, of one major advantage to LFP chemistry.

Stellantis’ upcoming Citroen e-C3 has already been dubbed by Tavares as his firm’s “first step of our answer to what is now called the Chinese invasion” of B- and C-segment affordable EVs. But some of these steps to avoid invasion look like they will themselves be Chinese in nature.

As well as sourcing Chinese-designed batteries from the same suppliers that China’s OEMs use, it has also signed a deal with China’s Leapmotor which foreses it able to export, sell and even produce the Chinese OEM’s cars outside of China.

It remains to be seen how comfortable the European Commission — which has already launched an anti-trust probe into Chinese EV imports — will be with Catl’s presence in the EU. The Chinese battery firm already has a plant under development in Erfurt, Germany, and plans another in Debrecen, Hungary.

Some US legislators have already openly questioned Catl’s project there with Detroit OEM Ford. A House of Representatives committee welcomed Ford intentions to pause plant development in September, and this week condemned reports that the legacy automaker's had decided to persevere with working with Catl.

Existing plans

Stellantis currently has three gigafactories either planned or ramping up in Europe, with one facility in the Hauts-de-France region currently scaling up production of batteries, according to the firm. These factories are joint projects with French oil major TotalEnergies and legacy German OEM Mercedes. It also plans for four battery plants in North America.

The three European facilities will initially have a capacity of 13GWh, which Stellantis says will rise to 40GWh annually by 2030.

And, despite the putative deal to source Catl LFP batteries for Europe-produced EVs, Stellantis has this year signed supply deals for nickel and cobalt sulphate, key minerals for NCM chemistry. Some of these mineral investments are compliant with US IRA subsidy requirements, whereas others are based in Finland and Norway, which can therefore supply EU-based EV production.

Catl already supplies its batteries to OEMs like US EV pure play Tesla, Germany’s VW, and South Korea’s Hyundai, as well as its US battery manufacturing JV with Ford that, at least for now, allows the cells to qualify for IRA subsides despite being reliant on Chinese IP.