BMW reaches battery deal with China's CATL

BMW iX3 17 830x553

German firms have been hard at work lining up their supply chains to produce massive volumes of electric vehicles, hoping to solve both problems at a stroke.

As part of its push towards sustainable mobility, German automobile manufacturer BMW has already planned to order roughly four billion euros' worth of battery cells from the Chinese battery producer, of which 1.5 billion euros worth of batteries would come from the Erfurt facility.

A contract for the construction of the new plant is due to be signed on Monday during a visit to Germany by China's Premier Li Keqiang.

CATL's Erfurt factory will make Thuringia "one of the most important European locations for battery technology", regional economy minister Wolfgang Tiefensee told news agency DPA.

"Our agreement sets a long-term framework for our future in China - a future involving continued investment, further growth and a clear commitment to the development and production of electric vehicles", said BMW CEO Harald Krueger said.

The CATL factory will create about 600 jobs and reach production of 14 gigawatt hours (GWh) by 2022.

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"I don't rule it out", he said. It declined to say how much the boost will cost.

However, BMW has no plans to jointly purchase cells with rival Daimler, he said, because of the competitive advantage that can be gained if batteries give greater range or can be charged faster.

The privately held company, a leading auto industry supplier, has opted out of making lithium-ion battery cells, saying it would take an investment of 20 billion euros to catch a fifth of the European market by 2030.

BMW is sourcing raw materials for the cells itself to pass to the battery makers, in particular cobalt, and is now negotiating long-term contracts.

Furthermore, the contract also states that sourcing materials for batteries is the responsibility of CATL, which is good, because as we've covered in the past, price fluctuations in minerals like lithium and cobalt can be enormous.

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