Mercedes and Stellantis are reevaluating their joint European EV battery factory projects with a possible shift to the more cost-effective lithium iron phosphate (LFP) cells. The partners, who joined forces in 2021 to establish the Automotive Cells Company (ACC), had ambitious plans to raise billions of Euros for constructing multiple factories. Despite opening one factory in France, work on their upcoming German and Italian sites has come to a halt, reflecting a temporary pause on decision-making.
What?
The slowdown in EV demand in Europe has prompted Mercedes and Stellantis to reconsider their strategies, with ACC’s head citing a shift towards mass-market segments for future growth. While Mercedes had initially pledged to go all-electric by the end of the decade, recent statements indicate a prolonged production of traditional gas vehicles until well into the 2030s. This decision has sparked mixed reactions, especially considering the urgent need to accelerate the transition to sustainable transport.
Why does it matter?
The possibility of transitioning to LFP cells presents a practical solution for reducing costs and simplifying mineral sourcing in EV production. Despite lower energy density compared to NMC cells, LFP cells offer increased durability and affordability, making them a viable option for entry-level models targeting cost-conscious consumers. Moreover, onshoring LFP production could help mitigate potential tariffs imposed by the EU and the US, ensuring competitiveness in the mass market segment.
How is it going to shape the future?
While the decision to pause EV battery factory construction raises concerns about delaying the adoption of EVs, the potential switch to LFP cells could yield positive outcomes for ACC. Embracing LFP technology not only aligns with the trend towards more affordable electric vehicles but also addresses the cost challenges associated with EV battery production. By adapting to market dynamics and considering innovative solutions like LFP cells, ACC could position itself competitively in the evolving automotive landscape.
In conclusion, despite initial setbacks in their battery factory projects, Mercedes and Stellantis have an opportunity to pivot towards LFP cells and enhance their resilience in the burgeoning EV market. As the industry continues to evolve, staying agile and responsive to changing consumer preferences will be key to shaping a sustainable and profitable future for both companies.