Germany chem industry warns about cuts to battery research funding

LONDON (ICIS)–While countries around the world bet on battery technology, Germany has taken a step back with plans to cut funding for battery research – to the dismay of its chemicals and other industries.

• Battery research key to energy transformation
• Trying to catch up with China
• New government may reverse cuts after election

With the cuts in the federal government’s 2025 draft budget, the German federal research and education ministry could stop funding new battery research projects as soon as next year.

The cuts would also include a reduction in so-called “commitment appropriations” (Verpflichtungsermachtigungen) of more than €100 million for spending on battery research in future years, according to the opposition Christian Democrats.

Chemical producers’ trade group VCI said that the cuts would lead to “a loss of added value” and raised the risk of Germany becoming more dependent for batteries on other countries or regions.

Germany needed strong research funding in this field in order to catch up with other countries, said Ulrike Zimmer, head of science, technology and environment at VCI.

“This is the only way Germany can maintain its chances in competition with the US and China, and also train the urgently needed skilled workers,” she said.

The planned funding cuts have already created uncertainties at academic and research institutes, VCI warned in a joint statement this week with trade groups from the machinery, electronics and digital sectors.

As it stands, employment contracts could currently not be extended and new contracts could not be signed, the groups said.

Research institutions were losing scientists due to the lack of prospects in the battery field, and the technology transfer via collaborations and start-up companies was coming to a standstill, they said.

They said the cuts would have far-reaching consequences as they affected all industries involved in the battery value chain: chemical companies, mechanical and plant engineering, cell manufacturers and all industries whose products are based on the performance, price and availability of batteries.

Affected sectors included electric vehicles (EVs), stationary storage systems, drones, power tools and robots, among others, they said.

TRYING TO CATCH UP WITH CHINA
Peter Lamp, head of battery technology at automaker BMW, told a parliamentary committee on Wednesday, 4 December that without powerful batteries, the transformation to a carbon dioxide (CO2)-neutral energy and transport industry was not possible.

The availability of modern battery technologies was crucial to successfully implementing the energy transition, he said.

Lamp criticized Germany’s current dependence on Asian battery cell suppliers.

Germany and the EU needed “technological sovereignty” in this area, he said, adding that the planned reduction in funding was therefore “incomprehensible”.

Auto industry trade group VDA said that funding for battery research was of “central significance” for the future of the German automotive industry.

The country’s Fraunhofer research institute said in a submission to the committee that government support for battery research was “an essential prerequisite” for the success of Germany’s energy and mobility transition.

Battery research played a key role in the development of electrochemical energy storage solutions, as well as battery and production development, it said.

China and other Asian countries were far ahead in developing and producing batteries, the institute noted.

“In order to counter the dominance of Asian players in battery technology and the associated supply chains, Germany and Europe must constantly build up skills and technologies for large-volume battery cell production for all applications, also as insurance against geopolitical dependency,” it said.

NEW GOVERNMENT
Government officials have said that the cuts were necessary because the country’s supreme court ruled last year that Berlin needed to trim spending in order to comply with the “debt-brake” (Schuldenbremse), which is a constitutionally enshrined provision to keep public deficits low and limit debt.

However, there is a chance that the cuts may be reversed in the event of a change in government in Berlin. Following the collapse last month of Chancellor Olaf Scholz’s coalition government, early elections will likely be held in February.

The Christian Democrats, which are ahead of Scholz’s Social Democrats in opinion polls on the election, have said that the cuts to battery research, as well as the abolition last year of an incentive for the purchase of EVs, were “short-sighted”.

The party has introduced a motion in parliament calling for “strong battery research in Germany”, which prompted Wednesday’s parliamentary committee hearing.

Countries such as China, the US, Japan, and South Korea had nearly tripled public spending on battery research over the past four years while Germany risked falling behind internationally in this important area, it said.

The cuts would also jeopardize the support the government already committed for investments in construction for battery plants, the party said, and noted the support the government has granted to a project by Sweden’s Northvolt at the Heide chemicals and refining site northwest of Hamburg.

Spending a lot of money on battery factories and significantly less on research and training was “highly risky”, it said.

The Northvolt project may not be realized, however. The company last month filed for Chapter 11 protection and reorganization in the US, raising questions about its future and the prospects of the German project.

BATTERIES, EVs AND CHEMICALS
Batteries and the EVs they power are important market opportunities for the chemical industry.

An EV contains more plastics and polymer composites and more synthetic rubber and elastomers than a conventional vehicle powered by the internal combustion engine.

However, BASF said earlier this year that market dynamics in the EV sector were slowing, and the company would therefore pause or may not make certain investments connected to the industry.

One project on which BASF paused work is a proposed commercial-scale EV battery recycling metal refinery at its chemicals production complex in Tarragona, Spain.

GERMANY AUTO INDUSTRY SENTIMENT IN DECLINE
Meanwhile, the sentiment in Germany’s automotive industry continued to deteriorate in November, according to the latest survey by Munich-based research group ifo this week.

Demand was weak and the industry remained stuck in a “mix of far-reaching transformation, intense competition, and a weak economy”, ifo said.

Also, thousands of Volkswagen workers went on a short strike on Monday, 2 December to protest against potential job cuts and plant closures in Germany, and their union, IG Metall, has announced another strike for Monday, 9 December.

The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA).

Additional reporting by Tom Brown

Please also visit the ICIS topic page Automotive: Impact on chemicals

Thumbnail photo source: BASF

Focus by Stefan Baumgarten