Mercedes and Stellantis Pause European EV Battery Projects Amid Market Shifts

Stellantis NV and Mercedes-Benz Group AG have halted their plans for two electric-vehicle (EV) battery plants in Europe, reflecting a strategic pivot driven by changing market dynamics. The decision affects projects in Kaiserslautern, Germany, and Termoli, Italy, initially part of a €7 billion ($7.6 billion) investment by the Automotive Cells Company SE (ACC), a joint venture between Stellantis, Mercedes-Benz, and TotalEnergies.

The construction halt comes amid a slowdown in demand for high-cost electric vehicles in Europe. According to ACC CEO Yann Vincent, growth is only expected in the mass market segments, prompting the company to reconsider its investment strategy. Stellantis CEO Carlos Tavares emphasized the need to align investment plans with the pace of EV adoption in Europe, stating, "We are going to adjust our investment plan to the scheme at which Europe is going to adopt EVs. If the European market shifts to EVs faster than the plan, we will invest faster. If the European market shift is slower, then we will invest slower."

One significant consideration for ACC is the potential shift to manufacturing low-cost lithium iron phosphate (LFP) cells at the Kaiserslautern plant. LFP cells, while offering lower energy density compared to nickel manganese cobalt cells, are cheaper and could be more suitable for entry-level electric vehicles. This strategic pivot could help Stellantis and Mercedes-Benz better compete in the mass market segment, where affordability is essential.

Why this matters: The halt in EV battery factory projects by Mercedes and Stellantis has significant implications for the automotive industry's transition to sustainable energy. This shift could impact the pace of electric vehicle adoption, influencing the industry's ability to meet emissions targets and affecting the environment.

The Kaiserslautern plant, which has already received €437 million in subsidies from Germany's federal government and Saarland state, was initially planned to have a capacity of 13.4 gigawatt hours, with the potential to expand to 40 GWh. This capacity would be sufficient to power approximately 600,000 cars. ACC is currently deliberating on how to press ahead with the project, with a decision expected by the end of this year or early 2025. Once a decision is made, it could take up to 2 1/2 years to manufacture the first cells.

This move is part of a broader trend among automakers and suppliers reassessing their EV and battery plans amid slowing sales growth. Volkswagen AG and Renault SA have similarly scaled back efforts to sell shares in their EV or battery businesses. The shift towards LFP cells, which have gained popularity in low-cost Chinese autos, reflects a growing need to make electric vehicles more affordable and accessible to a broader market.

Mercedes-Benz had previously committed to going all-electric by the end of the decade but later announced it would continue building gas vehicles into the 2030s. This pause in factory construction raises questions about the pace of the transition to sustainable transport and the strategies automakers will adopt to balance cost, demand, and technological advancements.

As ACC addresses these challenges, the automotive industry will be closely watching how these decisions impact the broader market and the future of electric mobility in Europe.

Key Takeaways

• Stellantis and Mercedes-Benz halt plans for 2 EV battery plants in Europe due to changing market dynamics.
• Decision driven by slowing demand for high-cost EVs and shift towards mass market segments.
• ACC considers manufacturing low-cost LFP cells to compete in mass market segment.
• Halt affects projects in Kaiserslautern, Germany, and Termoli, Italy, with a combined €7 billion investment.
• Move reflects broader trend of automakers reassessing EV and battery plans amid slowing sales growth.