Mercedes-Benz has signed a key strategic partnership with the Chinese battery cell manufacturer Farasis Energy that includes its battery gigafactory and R&D centre in Germany.
The deal makes Farasis the ‘anchor’ battery supplier for the German car maker as it moves to an ‘electric first’ strategy and includes a stake around three percent and a seat on the board.
The agreement includes the development and industrialization of new battery cell technologies with higher energy density and fast charging, along with with significant cost reductions. While Mercedes and Daimler will continue to use cells from Chinese supplier CATL, the move to a new cell technology for future designs will restrict the choice of battery supplier.
The deal catapults Farasis into the group of major global battery suppliers alongside CATL, Panasonic, LG Chem, Samsung SDI and BYD. All bar Panasonic have, or are building, battery gigactory plants in Europe alongside plants from local companies such as NorthVolt, BMZ and Saft. Farasis has a production plants in Ganzhou and a newly opened plant in Zhenjiang, and is building its new battery gigafactory in Bitterfeld-Wolfen. This is set to start production later this year with an annual target of 6GWh, rising to 10GWh a year. The company has an agreement to supply 140GWh of battery cells to Daimler up to 2027.
Mercedes says the deal will provide a secure source of supply of battery cells, highlighting the intense competition betwen car makers for battery supply. Farasis gains security for its planned construction of production capacity in China and Germany, where the battery gigafactory will create up to 2,000 new jobs and is designed as a CO₂-neutral factory from the start. A US battery gigafactory is also planned.
“We are very pleased to further expand our partnership with Farasis in taking a decisive step within the implementation of our electric strategy ‘electric first’,” said Markus SchäferMember of the Board of Management of Daimler and Mercedes-Benz. He is responsible for Daimler Group Research and the chief operating officer of Mercedes-Benz Cars and will take a seat on teh Farasis board after 12 months subject to regulatory approval.
“By strategically expanding our business relationship, we are pushing the electrification of our model portfolio ahead. With this agreement, we contribute our expertise in the field of battery cell development. At the same time, we are providing a boost for Farasis’s new plant and promoting the sustainable development of a key technology and its establishment in Germany,” he said.
The current production contracts with Farasis have added technical and commercial contractual components with legal and sustainability requirements. This will allow Farasis to join projects for the next generations of the Mercedes-Benz EQ products at an early stage. As a strategic partner, Merceds says Farasis is a ‘fixed cornerstone’ in the existing set of Mercedes-Benz battery cell suppliers
“China is the world’s largest electric car market with tremendous potential for further development. We are already working with strong and trusted partners in China, not only to enhance our local footprint but also to strengthen our competitiveness worldwide,” said Hubertus TroskaMember of the Board of Management of Daimler, responsible for Greater China. “By taking a stake in a Chinese battery cell manufacturer for the first time, we will further leverage the potential of advanced technology partners in the market, enabling us to pursue our electric strategy globally. In the future, we will continue to strengthen our activities in research and development, production and purchasing in China.”
Mercedes-Benz and Farasis had already agreed on a sustainability partnership last year to produce battery cells with electricity from renewable energies such as hydropower, wind and solar energy. For example, the next generation of EQ vehicles, including the EQS luxury sedan, will in part be equipped with CO₂-neutral battery cells.
Farasis currently employs more than 3,500 people worldwide and has research and development centers in China, Germany and the US.
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