European carmaking giants to spend £4.4bn on EV gigafactories

EUROPE’S largest car manufacturers have borrowed €4.4bn (£3.8bn) to build three new battery factories in the EU as the bloc seeks to cut dependence on China.

A joint venture between Mercedesbenz and Fiat-owner Stellantis has borrowed the funds to build new electric vehicle (EV) “gigafactories” across the Continent over the next few years.

Automotive Cells Company (ACC), which is also co-owned by France’s Totalenergies, said the €4.4bn fundraise was one of Europe’s largest ever debt issues in the EV sector.

It has borrowed the funds from banks including BNP Paribas, Deutsche Bank, ING and Intesa Sanpaolo.

ACC was set up in 2020 to become a “European champion” for EV car batteries amid a push by EU officials to reduce reliance on Asia.

Its first French factory in the Billy-berclau Douvrin region, dubbed the “valley of the batteries”, employs 2,000 people. ACC’S three new factories will be in the Kaiserslautern, Germany, Termoli in Italy and a second location in France. Each will employ 2,000 bringing ACC’S headcount to around 8,000.

Around 40pc of the cost of an electric vehicle is in the battery and ACC said producing more inside Europe will make cars “significantly” cheaper.

ACC is aiming to raise €7bn overall to fund construction of the new factories.

The investment, which is partly supported by EU funds, comes amid fears about a lack of self-reliance in the sector. The global EV battery industry is effectively controlled by China, South Korea and Japan. China has had around 70pc of global production since 2021.

There are currently 240 gigafactories around the world, with an additional 160 to be built over the next six years mainly in China, according to Benchmark Mineral Intelligence. Europe will have 36 by 2030, according to the research group.

Chinese giant Contemporary Amperex Technology, known as CATL, will have two of Europe’s five largest gigafactories by the end of the decade in Hungary and Germany. EU members have subsidised some of the ACC scheme, with the French and German government’s putting in €1.3bn.

Italy is yet to back ACC amid a fallout between Stellantis and Giorgia Meloni, the prime minister. She wants Stellantis to produce a million vehicles a year in Italy, with state subsidies seen as a bargaining chip in negotiations.

Stellantis is a Franco-italian company created through the merger of Fiat and Peugeot. It is the majority owner of ACC with a 45pc stake. Germany’s Mercedesbenz owns 30pc and Totalenergies, through its subsidiary Saft, owns 25pc.

Yann Vincent, head of ACC, said: “The transition to the electrification of vehicles is still on the way.

“To meet this immense challenge, our customers must be able to rely on robust and reliable European players like ACC, capable of delivering high volumes of competitive batteries with a low CO2 footprint.”

In the UK, Tata Group last year announced a £4bn investment to build a new gigafactory in Somerset.