Svolt Energy, a battery maker that was spun off from Great Wall Motor (HKG: 2333), has put a halt on its two battery factory projects in Germany with no set timeline for resuming work, as reported by local media outlet Caixin. The company had initially planned to construct two factories in Germany, including a battery module and pack plant in Saarland and a cell plant in Brandenburg.
The pack project, which was announced in November 2020, was intended to be completed by mid-2024, with a design capacity of 24 GWh and a total investment of €2 billion. On the other hand, plans for the cell plant were revealed in September 2022, with an annual capacity of 16 GWh. This would have been Svolt’s first overseas cell plant, scheduled to be operational by 2025. However, construction on both plants has been suspended with no specified timeline for resuming work, according to sources close to Svolt.
The decision to halt construction on the European plants was influenced by Svolt’s challenges in the Chinese domestic market. The company is currently facing financial constraints and is unable to manage the significant capital investment required for overseas factories. The estimated investment for the two European plants amounts to RMB 30 billion yuan, a sum that exceeds Svolt’s financial capacity as a lithium battery maker.
Svolt Energy, which became independent from Great Wall Motor in 2018, specializes in battery materials, cells, modules, packs, BMS, and energy storage technology. Despite being one of China’s largest battery manufacturers, with 1.29 GWh of batteries installed in September, Svolt holds an 8th position in the domestic power battery market with a 2.36 percent share, as reported by the China Automotive Battery Innovation Alliance (CABIA). In comparison, Contemporary Amperex Technology Co Ltd (CATL, SHE: 300750) and BYD (HKG: 1211, OTCMKTS: BYDDY) dominate the market with shares of 44.02 percent and 24.20 percent, respectively.
Approximately 20 percent of Svolt’s capacity is dedicated to exports, but the majority of overseas orders originate from Great Wall Motor. Svolt’s actual export capacity is less than 20 percent when factoring in batteries that are first installed in China before being exported. The decline in Chinese power battery prices over the past two years has been attributed to a slowdown in the new energy vehicle sector and a decrease in raw material prices, such as lithium carbonate.
In response to industry challenges, Svolt initiated significant changes in early 2024, including the removal of underperforming employees, to address overcapacity and price competition. Additionally, Great Wall Motor is also scaling back its operations in Europe, with plans to close its European headquarters in Munich and dismiss all local employees. The company adjusted its European business strategy by closing its German office in June and taking back management of its European dealerships and customers.
In conclusion, Svolt Energy’s decision to suspend its battery factory projects in Germany reflects the company’s financial constraints and challenges in the Chinese domestic market. Despite its position as one of China’s leading battery manufacturers, Svolt is currently facing obstacles that prevent it from pursuing overseas factory projects at this time.
