Chinese tech opens shop in Germany: Can Europe still catch up in cutting-edge technology? | DW News

Key Concepts

• Electric Vehicle (EV) Battery Dominance: China’s overwhelming control of the global EV battery market (67% market share).
• CATL: Contemporary Amperex Technology Co. Limited, the world’s leading battery manufacturer, and its expansion into Europe.
• Made in China 2025: China’s ambitious industrial policy aimed at achieving technological leadership in key industries.
• Geopolitical & Supply Chain Risks: Challenges posed by long transport routes and geopolitical tensions affecting battery supply.
• Research & Development (R&D) Investment: The critical role of R&D in battery technology advancement and China’s significant investment in this area.
• Industrial Policy Sustainability: Concerns regarding the long-term sustainability of China’s heavily subsidized industrial policies.
• European Automotive Industry Challenges: The struggle of the European automotive industry to compete in the EV market.

The Rise of Chinese Battery Dominance & European Response

The European automotive industry, while still a significant economic force (supporting 13 million jobs and generating 7% of European economic output), is facing challenges in adapting to the shift towards electric mobility. A core issue is the dominance of Chinese companies in the production of EV batteries. Currently, six of the top ten battery manufacturers globally are Chinese, collectively controlling over 67% of the global market. This reliance creates vulnerabilities due to long transport routes and increasing geopolitical tensions.

CATL’s European Expansion & Operational Security

To mitigate these challenges, leading battery manufacturer CATL has begun establishing production facilities within Europe. In 2023, CATL opened its first European plant in Arnstadt, Thuringia, Germany, with an annual production capacity of 14 GWh – enough to power over 200,000 electric cars. The factory operates with a high degree of automation and emphasizes operational security, exemplified by the requirement for visitors to cover their smartphone cameras.

CATL operates over 10 highly automated factories worldwide, with the Thuringia plant being its only location outside of China. The company is actively investing in R&D to improve battery performance, focusing on increased energy density, faster charging times, and enhanced safety. Collaboration with German research institutions like Fraunhofer IKTS is crucial; cells produced in Arnstadt are sent to Fraunhofer IKTS for testing of swelling force and overall cell behavior. As stated by a representative, “Zellen, die bei uns in Anstadt produziert werden, werden zu Frauenhufe IKTS geschickt und es geht dann darum die Swelling Force Eigenschaften und das Verhalten von den Zellen zu untersuchen.” (Cells produced in Arnstadt are sent to Fraunhofer IKTS to examine the swelling force properties and the behavior of the cells). This collaborative approach is seen as mutually beneficial for industry, research, and the economy.

The Shift in Global Technological Leadership

The current situation represents a significant shift in global technological leadership. Historically, German companies sought low-cost production in China, positioning China as a “student.” Now, China has emerged as a technology leader in many sectors, blurring the lines between teacher and student. This transformation is largely attributed to the “Made in China 2025” industrial strategy, launched a decade ago, which aims to achieve technological leadership in ten key industries, including automotive and battery technology.

Data illustrates this shift: in 2018, Chinese machinery exports to the EU were valued at €20 billion; this figure is projected to reach €50 billion in the current year. This increased competition is putting pressure on European manufacturers.

China’s Industrial Policy & Sustainability Concerns

China’s success is underpinned by substantial investment in R&D. While the US remains the largest investor in R&D globally, China’s spending has increased dramatically in recent decades. However, this success is fueled by a heavily subsidized industrial policy that generates output exceeding domestic demand, leading to a growing export surplus and strained trade relationships.

Experts express concerns about the long-term sustainability of this approach. One commentator notes, “It’s a loose-loose game…and it’s very unsustainable on the Chinese side.” Another argues that Chinese industrial policies are “extremely wasteful…misallocate resources…slowed Chinese economy down” and while appearing successful in the short term, may not be sustainable long-term.

European Response & Future Outlook

Europe must address its dependence on Chinese battery manufacturers. A key challenge is maintaining consistent funding for R&D. As highlighted by a German industry representative, “Da fehlt eine Kontinuität, eine Planbarkeit.” (There is a lack of continuity and predictability).

The competition is intensifying, with Chinese companies like CATL continuing to expand their presence in Europe, building factories closer to clients to improve market access. The situation represents a “race for cutting-edge technology and market share.”

Conclusion

The European automotive industry faces a critical juncture. China’s dominance in EV battery production, driven by ambitious industrial policies and substantial R&D investment, poses a significant threat. While CATL’s European expansion offers some mitigation, long-term success requires sustained investment in European R&D, consistent industrial policy, and a proactive approach to securing supply chains to avoid complete dependence on Chinese manufacturers. The current trajectory suggests a potentially unsustainable situation, highlighting the need for strategic action to ensure the future competitiveness of the European automotive sector.