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Stellantis is exploring a partnership with China’s CATL to build low-cost electric car batteries in Europe, in a move that would increase the affordability of its electric vehicles but deepen its reliance on Chinese battery technology.
The two businesses have struck a supply agreement for batteries, and are in talks that may lead to a 50-50 manufacturing joint venture in the region, they said on Tuesday.
The deal comes despite repeated warnings from Stellantis chief executive Carlos Tavares about the risk to Western carmakers from Chinese brands and technology and reflects the pressure the carmaker faces to lower the cost of its electric cars.
Tavares led calls to the region’s parliament to impose tariffs on imported Chinese EVs in Europe to protect local carmakers. But the agreement on Tuesday showed that even Stellantis, which also buys batteries from China’s BYD, had chosen to deepen its reliance on Chinese technology.
While tensions have heightened over Chinese EV sales in Europe, the largest number of battery factories being built in the region are owned by Chinese companies, including CATL, SVolt, and Envision.
Stellantis, whose brands include Fiat and Vauxhall, believes lower costs are essential if it is going to switch to selling only EV models in the region by the end of this decade. Tavares has repeatedly cautioned about the impact of electrification on rising prices, warning this risks pricing middle-class buyers out of owning a private vehicle.
On Tuesday he said the CATL partnership “is another ingredient in our long-term strategy to protect freedom of mobility for the European middle class”.
Tavares added: “CATL is the industry leader in this sector and together with our iconic vehicle brands, we will bring innovative and accessible battery technology to our customers.”
The Stellantis-CATL joint venture, if formed, would manufacture lithium iron phosphate batteries, a cheaper technology than the nickel manganese cobalt batteries that Stellantis currently uses in the region.
The technology would be used in Stellantis’ smaller models, the company added.
The carmaker already plans to source NMC batteries in the region from ACC, a joint venture with Mercedes-Benz and energy group Total. A CATL plant in Europe would be Stellantis’ fourth, after three planned ACC factories.
Tesla has led the industry in switching to LFP batteries, which are less power dense but substantially cheaper.
CATL has become a world leader in LFP batteries, which it supplies to carmakers including Tesla and Ford.
“With Stellantis’ time-honoured expertise in car manufacturing and CATL’s advanced battery technology, we believe the partnership will be a decisive step on both parties’ journey towards carbon neutrality goals,” said CATL chair Robin Zeng.
