How the big bet on electric car gigafactories went badly wrong

The risk of punishing tariffs are also making carmakers reluctant to place orders for Chinese batteries, and are slowing Chinese companies’ overseas ambitions. Joe Biden has announced a 100pc tariff on electric cars and a 25pc tariff on batteries. Europe is following as well as imposing strict environmental standards.

That means Western countries will need domestic battery manufacturing in order to drive the electric revolution, but European companies have struggled for traction. 

Plans for a network of gigafactories across Europe are fading, however. Northvolt, a Swedish group that has raised €15bn (£13bn) from the likes of BMW and Volkswagen, is considering cutting back its investment plans. ACC, a battery joint venture between Stellantis, Mercedes and French energy giant Total, has suspended work on plants in Germany and Italy. 

If Europe is falling behind in the race, Britain has barely put its shoes on. Last year, Britishvolt, which was planning to build the UK’s first gigafactory, collapsed. Battery research group the Faraday Institution has estimated that Britain will need five gigafactories by 2030 to support its car industry. 

Two are currently confirmed, a joint venture between China’s Envision and Japan’s AESC in Sunderland, and a planned Tata Group factory in Somerset. A third may be announced soon. China’s EVE Energy is reportedly preparing to invest £1.2bn in a facility in Coventry.

Richard Moore, the head of battery strategy at the proposed West Midlands project, says it is in “mature negotiations” with an investor, but declines to confirm EVE’s interest. He says the current oversupply in the battery market is a short-term phenomenon. “It will just be a blip when you look at a graph in five years,” he says “We need 100GWh (of capacity) in the next five years, today it’s in single figures. Is there overcapacity (here)? No.”

The concern is that by the time motorists warm to electric vehicles, the market may have changed dramatically. Electronics is prone to volatile boom and bust cycles. “The current price environment will be particularly felt later in the decade,” says Fastmarkets’ Lusty. “It has the potential to drive up long-term material prices and cell costs.”

The world is currently drowning in batteries. In a few years, it may be running out.