Mercedes and Stellantis pause work on EV battery plants over demand decline

Stellantis NV and Mercedes-Benz Group AG are putting work on two electric-vehicle battery plants on hold and may pivot to manufacturing lower-cost cells in light of slowing demand for still-expensive EVs.

Automotive Cells Company SE, which had laid plans to build three battery factories in Europe at a total cost of €7 billion ($7.6 billion), has stopped construction in Kaiserslautern, southwest Germany, and paused prep work on a site in Termoli, on the eastern coast of Italy.

Demand for EVs has slowed in Europe, with growth only expected in mass market segments, ACC Chief Executive Officer Yann Vincent said on the sidelines of a BloombergNEF event in Munich. One of the options the venture will assess is making cheaper lithium iron phosphate cells in Kaiserslautern, he said. In a separate statement Tuesday, ACC said that it’s reopened discussions on plans for Termoli and will hold talks through the beginning of next year.

ACC’s review is just the latest in a line of moves by automakers and their suppliers to rejigger EV and battery plans amid a slowdown in sales growth. Volkswagen AG said last month that its European battery factories may take longer to reach full capacity, and both VW and Renault SA pulled back early this year from efforts to sell shares in EV or battery businesses.

“We are going to adjust our investment plan to the scheme at which Europe is going to adopt EVs," Stellantis CEO Carlos Tavares told reporters Tuesday after touring the carmaker’s plant in Melfi, southern Italy. “If the European market shifts to EVs faster than the plan, we will invest faster. If the European market shift is slower, then we will invest slower."

File photo of an employee working on an assembly line of electric vehicles (REUTERS)

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File photo of an employee working on an assembly line of electric vehicles (REUTERS)

Automakers have increasingly gravitated toward lithium iron phosphate, or LFP, batteries that offer off lower energy density but cost less than nickel manganese cobalt cells. Both Stellantis and Mercedes are requesting lower-cost solutions for batteries to power planned entry-level electric vehicles, Vincent said.

ACC will deliberate until the end of this year or early 2025 on how to proceed with the plant in Germany’s Saarland state. It will then take as much as 2 1/2 years to manufacture the first cells, he said.

The Kaiserslautern plant has been granted €437 million in subsidies by Germany’s federal government and Saarland state, with ACC applying for additional funding. Initial capacity of 13.4 gigawatt hours will rise to 40 GWh, enough to power about 600,000 cars. ACC inaugurated its first major plant a year ago in Douvrin, northern France.

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