European plans for battery supply chain face delays as US lures components producers

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

European plans of creating a battery supply chain for electric cars independent of China face big delays as companies focus on the US market because of clean energy subsidies, a top manufacturer has warned.

Chris Burns, a former Tesla engineer who heads Australian battery materials producer Novonix, told the Financial Times that the US Inflation Reduction Act was drawing producers away from Europe.

Novonix, which manufactures the battery component graphite that is vital for the electric car transition, plans to focus on the US market because of incentives in the $369bn act, which the EU and UK have failed to match.

“We’ve always looked at expansion into Europe but financing becomes the biggest challenge,” said Burns.

“Our focus is on delivering the Riverside site [in Tennessee where it intends to produce graphite] and starting the next site in North America. It will keep us more than busy to the end of this decade.”

Burns’s comments highlight the challenge Europe faces in building a supply chain independent of China, the world’s leading supplier of graphite and other raw materials needed for batteries, without an injection of subsidies.

The challenge is particularly daunting for the anode component of the battery, which is made out of graphite, as China controls 75 per cent of this part of the supply chain, according to Benchmark Mineral Intelligence.

China’s manufacturers are increasingly targeting Europe and nearby regions for expansion after Washington moved to curb their presence in the US with tougher regulations.

Beijing also increased export controls on graphite in October.

Shanghai Putailai, a manufacturer of battery materials, announced in May plans to invest $1.3bn in building a plant in Sweden, while Chinese rival Ningbo Shanshan is weighing a similar investment in Finland.

In addition, Canadian battery materials group SRG Mining, which has partnered with Chinese technology group C-One, said it plans to build a $300mn-$500mn facility in Morocco to serve the US and European markets.

Novonix is aiming to produce 20,000 tonnes of graphite a year at Riverside in Tennessee before expanding further in North America to 150,000 tonnes annually.

Investors in Novonix include Korean battery maker LG Energy Solutions and Phillips 66, the US oil refining group that provides a critical source of non-Chinese coke needed to make graphite from the UK’s Humber refinery.

“We’ve looked at Europe and the UK on the idea of sourcing from Humber,” Burns said. “But those plans will be in the future.”

Burns said Novonix could start drawing up plans for a European plant later this decade but that would depend on commitments from carmakers and cell manufactures to buy its future supply.