(Yicai Global) Oct. 25 -- Chinese battery companies have been hiking investment in European countries such as Germany, Hungary and Poland, as well as in the United States, amid soaring demand.

“In recent years, China’s direct investment in Poland has been surging, especially in the electric vehicle industry,” Andrzej Juchniewicz, representative of the Polish Investment and Trade Agency in China, told Yicai Global.

“At present, the industry accounts for about 70 percent of China’s investment into Poland, and factories for new chemical battery material firms such as Guotai Huarong New Chemical Materials have gradually been established in Poland,” he said.

The rise in Chinese investment in Poland has meant that Juchniewicz is increasingly busy, and in the past year he has visited companies more often than in the past.

“It’s an obvious benefit that companies now decide on project investments more quickly,” he said. “For example, we can now complete relatively large investment project orders in half a year, worth EUR30 million to EUR50 million (USD29.6 million to USD49.3 million). In the past, Chinese companies could need two or three years, or even longer, to make a decision.”

Building New Factories

Last month, Chinese lithium battery giant Contemporary Amperex Technology announced a project to build its second factory in Europe in Hungary, while SVOLT Energy Technology Co. said it will build a second overseas plant in Brandenburg, Germany. Envision Group also recently stated that it will have a zero-carbon battery factory in South Carolina, the United States.

Market research institute SNE predicts global demand for power batteries may reach 406 giga-watt hours by next year, while the current supply is only 335 GWh.

“The overseas market is big enough,” said Chen Youye, a partner at Roland Berger. “Downstream customers want batteries and enterprises need to construct factories, which is the major motivation for Chinese battery companies to increase overseas investment.”

“Investments abroad naturally go where there is the greatest increase in demand,” Che said. “At present, the largest demand in the battery industry comes from electric vehicles, so regions such as Europe and the US where the EV penetration is gradually increasing are good choices.”

Although Chinese companies are constantly investing overseas, rival Japanese and Korean firms have also been working hard for a long time in the European and American markets. Battery giant LG Chem already has a factory in Poland. The firm also said it will build six plants in North America by 2025. Panasonic announced in July that it would invest USD4 billion in a second battery plant in Kansas.

In Chen’s view, battery companies from China, Japan and Korea will have as many opportunities as local European and American enterprises in the battery market. “After all, the profit from power batteries is big enough, and whoever can quickly build production capacity to meet the downstream demand will be able to seize the opportunity,” he said.

Bringing Differences

The overseas business manager of Svolt Energy Technology told Yicai Global that the ability to bridge the differences between China and overseas markets is the key to capturing market share.

“For example, the regulations differ a lot in China and Europe in terms of plant construction, planning, environmental protection and fire prevention processes, which makes the construction period much longer in Europe than in China,” he said. “The procurement period is also longer to meet various European certifications.”

“Meanwhile, there are obstacles in time difference, language and culture,” he added. “The incomplete supply chain of the European battery industry is also a big challenge."

But Chen also said that these problems are not unique to Chinese companies, as Tesla's German factory has also faced many challenges. He said that the biggest challenge for power battery companies still lies in having the flexibility to meet changing market demand.

Editor: Tom Litting