Extract D: Lithium-ion battery cell manufacturers supplying the European EV market, 2024
| Company | Market share (%) |
|---|---|
| CATL (China) | 34.2 |
| LG Energy Solution (South Korea) | 28.1 |
| Samsung SDI (South Korea) | 12.5 |
| Northvolt (Sweden) | 9.8 |
| Panasonic (Japan) | 7.2 |
| BYD (China) | 4.5 |
| SK On (South Korea) | 2.3 |
| Others | 1.4 |
Extract E: Scaling up and strategic integration in battery manufacturing
In Europe, where the transition to electric vehicles (EVs) is a pillar of industrial decarbonisation, governments have actively supported the establishment of "gigafactories." To protect domestic supply chains from external shocks, European states have heavily subsidised domestic firms and encouraged strategic partnerships. For example, the creation of Automotive Cells Company (ACC)—a joint venture between Stellantis, Mercedes-Benz, and TotalEnergies—demonstrates the push towards regional consolidation to match the dominance of East Asian giants.
Building a modern gigafactory requires immense capital outlays and specialised engineering expertise. At the start of the EV transition, dozens of start-ups proposed localized battery assembly plants. Today, high capital barriers and spiralling research and development (R&D) costs for next-generation chemistries (such as solid-state cells) have forced rapid consolidation. Many smaller developers have been absorbed by global conglomerates or failed entirely. To maintain duty-free, friction-free access to European car manufacturers, international giants have set up massive, highly automated production hubs in central Europe, particularly in Poland, Hungary, and Germany.
Beyond outright acquisitions, battery cell manufacturers are engaging in deep technological collaboration. Competitors frequently share joint research platforms to standardise cathode material specifications or co-develop automated cell-assembly machinery. Sharing these massive developmental costs is crucial for mitigating high investment risks. However, regulatory authorities monitor these technical alliances closely. While standardisation can lead to cost-efficiencies, cooperative agreements between dominant market players can easily morph into collusive behavior, establishing high barriers to entry and reducing consumer choice.
European Commission estimates of minimum efficient scales (MES) in EV battery cell manufacturing (2023)
| Cell Technology | MES as a % of total EU EV battery demand |
|---|---|
| Standard LFP Cells | 18 |
| High-Performance NMC Cells | 25 |
The highly concentrated nature of the European battery cell manufacturing industry is directly linked to the exceptionally high minimum efficient scale (MES) required to compete on unit cost. When a single optimal plant must supply a huge percentage of the entire market's demand to achieve lowest unit costs, only a small number of firms can realistically survive.
Explain the concept of ‘minimum efficient scale’ (Extract E) and analyse its implications for the structure of, and barriers to entry to, the lithium-ion battery cell manufacturing industry in Europe.
