This decade the roles have been reversed: China is coming to Germany as a technologically superior investor. “Europe cannot accomplish the shift to electric vehicles on its own,” Kai-Uwe Wollenhaupt tells China.Table in our Monday interview. In the interview, the European head of battery manufacturer SVOLT explains why his company is starting with cutting-edge technology in Saarland right away, while European industry has mostly only brought the previous generation to China.
Wollenhaupt thus describes nothing less than a turning point in time that should trigger a complete rethink among the public. “The equation ‘China bad, Europe good’ does not fit our global times,” he concludes. “There are many levels on which we encounter China. Some as rivals, others as partners.”
It is the precise dilemma of “partner or rival?” that Switzerland is currently struggling with. Amelie Richter analyses why the overdue adjustment of China policy is so difficult for our neighbor. Even if Switzerland is smaller and does not belong to the EU, the issues discussed in Bern provide a taste of what the new German government will deal with after the election.
Wishing you a pleasant week.
Mr. Wollenhaupt, the number of possible locations for SVOLT‘s investment in Europe ran into the dozens. Why Saarland?
Many factors speak for this. But what has convinced us most is the very agile political environment in which we receive valuable help in implementing our plans thanks to the additional support from SHS Strukturholding Saar.
In what form?
Strukturholding will construct the buildings and infrastructure for the cell factory in Ueberherrn and the module and high-voltage storage factory in Heusweiler. We will discuss what we need, and Strukturholding will then work out how to implement it so that we do not fall into the trap of applying a Chinese solution to European requirements in the first place. In that case, implementation could be significantly delayed. We are currently facing the challenge of adapting the processes that were developed in China to European needs and requirements.
Strukturholding has also made advance payments on behalf of SVOLT and purchased the building plots. They can now decide at their leisure whether they want to take over the sites later or simply lease them. What do you do?
This has not yet been finally decided, but this does not affect the profitability of Strukturholding. The Heusweiler site is being built on the former site of a laminate factory. SHS would also have no problem with a rental solution because that would bring it a reasonable return according to standard market conditions. That’s why my gut feeling tells me that we should lease in Heusweiler and that it would be worthwhile if we became the owner in Ueberherrn. But in the final analysis, it is important that the financing requirements are covered by corresponding returns and that there are corresponding securities so that the acting partners do not take any risks.
In Ueberherrn, the purchase is also worthwhile because the location is in a structurally weak zone, and you can therefore hope for ten percent of the investment sum as a subsidy.
Admittedly, we are happy to take that, of course. Others do the same. Nevertheless, the subsidy was not the only factor in the investment decision. This is only a one-off positive effect. But we have to build a site that is profitable in the long term. Subsidies no longer play a role after a few years. We have not even submitted the final application for the GAW subsidy yet. This has to be prepared precisely because Brussels has the final decision-making authority for such an investment volume. But I assume that this will be successful in our case.
As a result of geopolitical developments, Chinese investments are increasingly viewed critically. Do you sense rejection?
I don’t see that at the Saarland government level. That comes rather from a minority of the population. But that is only a tiny segment, which is partly China-bashing (read in China.Table). These are people who are worried that a colossus is being built there that can’t be touched. This creates fears of environmental damage and high water consumption. To this I say: We will comply with local legal requirements and regulations. No one needs to be afraid. There are entrepreneurial risks, but they exist everywhere. The equation “China bad, Europe good” does not fit into our global times.
The growing tensions between China, the US, and Europe are not a cause for concern for you?
There are many levels on which we encounter China. On some as a rival, on others as a partner. In our industry environment, we tend to refer to it as a partnership. As SVOLT, we are not politically active. Europe cannot achieve the electric turnaround on its own. That’s why this partnership is beneficial. If it were all based on pure rivalry, the venture would have no future. When I talk to colleagues in China, there is also a strong distinction between the relationship with Europe and that with North America. However, I also assume that the relationship with the USA will be less emotional in the future.
Your Chinese competitor CATL is building a site in Thuringia, Tesla wants to produce in Brandenburg, and German carmakers are also creating new capacities. Will Germany become the world’s number one battery production location?
Well, the technology comes from Asia – China, Korea, Japan. There are a lot of people there who have a head start in know-how. Electromobility is being promoted enormously in China, for example. Many start-ups have much shorter development times than we do in Europe. This also happens under a competitive cost structure. In Germany, it’s the OEM in the automotive industry that were used to model cycles of seven years. We have to close the gap here first. That’s why I don’t think we will surpass the technology of the Chinese or Koreans. But if you can positively combine the power and speed in China with the advantages of Europe, you create an extremely competitive company.
What advantages do you want to bring together?
We benefit from solid mechanical engineering and a pool of highly efficient workers who can manage the complexity that battery manufacturing entails. In our future battery cell factory in Überherrn, we will have to manage around 3,500 process parameters successfully. Once a decision has been made in China, the speed of implementation is enormous. It is important to influence the decision-making so that it can be transferred to the European environment, and we can thus benefit from the speed. One of SVOLT’s strengths is its large number of international colleagues. We are not perfect either, but we are continuously working on it. So far, it is working well. Today, we are still a small but rapidly growing team in Europe.
Is there no highly efficient workforce in China?
In China, management is different. The training is also different here in Germany. In Saarland, the structural change also ensures that qualified specialists are easier to find because other companies here also have this need. The demand creates a larger supply. And if you compare the staff turnover between China and Europe, then it is certainly the case that here we are more likely to succeed in keeping the growing quality that we train our employees to have in the company. It is not for nothing that Germany is a successful exporter despite its high-cost structure.
And yet, you won’t go into series production of batteries until the end of 2023 at the earliest. Will you be the victim of German bureaucracy?
Of course, not everything happens at the speed we would like it to, in Europe. If you build a factory in China, it takes a year and a half. Here we need three. But if you know that beforehand, it’s not too much of a problem.
When the time comes, will German SVOLT batteries be better than Chinese ones?
No, we are a global company. The quality must not differ. The audits are carried out by international teams that apply the same standards everywhere.
The industry does not like to talk about the reject rate, which is said to be around 30 percent. Do they hope to reduce the rate and produce a higher number of top-quality batteries in Germany?
I’d be very happy if that were the case. However, I can tell a lot on PowerPoint. I know my colleagues in China. They have a head start in terms of experience, with which they have reached a level that we have yet to achieve here. But we will make every effort to ensure that at some point, we can set a benchmark in the competition within the company.
And then also produce for the Chinese market?
No, it won’t get that far. But we have to be competitive with the batteries that are coming to Europe from the Chinese market. This is also possible because the Chinese provide us with the latest technology here in Germany. In the past, we Europeans, on the other hand, have only ever built up second-generation technology in our local production facilities in China…
…because German companies have to fear that their technology will be stolen?
To prevent this, SVOLT plans to build the most modern factory with the best technology currently available in Ueberherrn. We are not building copy-and-paste here. Additionally, SVOLT also brings technologies such as artificial intelligence.
SVOLT CEO Yang Hongxin predicts that because of the EV boom, battery manufacturers will only be able to meet 60 to 80 percent of demand in the coming years. Has the industry slept through the boom?
No, nobody slept through anything. SVOLT certainly didn’t. We had four-gigawatt hours of battery capacity installed towards the end of 2019 and are now already at four and a half times that. We plan to have over 200 gigawatt-hours installed by 2025. It is rather that the environment has been surprised by the acceptance that electromobility is currently experiencing. It is greater than we as an industry can keep up within the short term. That’s why it will first be a matter of managing the shortage. Anyone who has the opportunity to reserve capacity today should do so. The shortage will continue to accompany us for the time being.
You have announced a drop in prices from the current level of around €100 per kilowatt-hour to just €65. But if demand will be greater than supply, why shouldn’t prices rise?
This is primarily due to increased volumes and advancing production technology. By 2025, we will have quadrupled the speed of our assembly processes compared to 2019. In addition, there are developments such as the wet coating process, which is being substituted with dry coating technologies. For this, we need significantly less space and energy. Today, there are also fewer module solutions than before, but there are significant developments to apply the cell-to-pack process. This increases utilization so that a greater amount of energy can be stored in the same installation space. Furthermore, fewer components are required. In the next step, there are already considerations for cell-to-chassis solutions, in which the batteries can be integrated directly into the car bodies.
Will you give the industry a price war with support from China that will kill off battery manufacturing by German OEMs from the auto industry?
No, the future localization rate in Europe is more than 60 percent. You can’t achieve that in China. Because of the complex supply chain, it also doesn’t make sense to deliver from China in the long term. We are only doing this now until we have built up local capacities in Europe.
The new anti-sanctions law in China could force companies to set up a supply chain independent of the rest of the world in parallel for the Chinese market. Are you preparing for such a scenario?
For us, the question of different supply chains comes up from a different perspective. For battery construction, we need many sensitive materials that have to be stored in a demanding environment. You can’t pack all of that on a plane, not even on a train, but most of it has to be shipped. That means the supply chain has a response time of about six weeks. So if there’s a quality problem, six weeks of capacity has to be replaced. That is very expensive. The regulations on localization quotas do the rest. Conversely, this also means that more and more successful Chinese suppliers will come to Europe. With Battery cells “local for local” is also a necessity that arises from the complexity of the materials.
In other words, stabilizing supply chains is becoming an ever-greater challenge?
It is in our industry because the development processes are so fast and we as a company have to keep up. That can sometimes make you dizzy. It’s all a “moving target”. But we try to exert as much influence as possible by producing the material for sensitive areas ourselves. Company participation in the mining sector also helps us. But we, as SVOLT Europe, are still at the beginning. In contrast, our partners in China are already established, and there is still a need for further action in Europe.
And all that effort for ten years until the next drive comes along.
There will be different drives in the future. It would be too naive to invest in several terawatts now with this short horizon. But it would also be wrong to think there is nothing else. But there is no good or bad. Where hydrogen makes sense, it will prevail. But the safety aspect, which you get to grips with in batteries, is still ahead of hydrogen solutions. We are not afraid of other drives. On the contrary, they will be a very fruitful addition that will by no means make the battery superfluous.
Kai-Uwe Wollenhaupt has been President of the European subsidiary of the Chinese battery manufacturer SVOLT for two years. Previously, the manager held management positions at SCS Stahlschmidt Cable Systems, the service provider PSM International and the steel chemicals specialist SKW.
SVOLT from Changzhou is one of the largest manufacturers of EV batteries in China and is rapidly gaining market share globally. The company spun off from vehicle manufacturer Great Wall in 2018 and is currently investing in Saarland.
It now has been about three months since the EU imposed sanctions on four officials and an organization for human rights violations in Xinjiang. The European non-EU states Norway and Iceland joined the EU sanctions, but the Swiss government remained silent. The media criticized Switzerland for dragging its feet on China sanctions and is taking a conspicuously long time to react. Only a working group had been formed. Do the Swiss lack tactics for dealing with the growing strength of the People’s Republic? Calls for a new course in Switzerland’s China strategy are growing in civil society and in parliament.
For Switzerland, such considerations are even more difficult than for Germany. A country with 8.5 million inhabitants is pitted against a nation of billions. Even those who are as technologically and financially strong as Switzerland perceive this as an extreme imbalance. At the same time, the country has consciously intertwined itself economically with China in recent years. What was considered a clever strategy at the time is now creating problems.
According to critics, the previous concept has led to a dead-end: For too long, Switzerland has given clear priority to economic relations, says political scientist and Swiss China expert Ralph Weber. Other issues, such as Human Rights, were left out of the equation. As a result, Switzerland has maneuvered itself into a situation in which “increasing economic integration has now also limited its own sphere of action,” says Weber in an interview with China.Table. It is becoming increasingly difficult to align economic relations with one’s own values and ideas. A dilemma for the Swiss: “We are in a very tricky situation because while we want to continue to deepen economic ties, the People’s Republic of China, on the other hand, is taking a more confrontational approach around the globe and Swiss civil society and parliament are increasing the pressure on both the government and the economy”. In Weber’s opinion, not having an opinion or a position is no longer an option: The myth of neutral Switzerland must finally be “shaken” as far as China is concerned. Weber pointed out: “One could polemically say: What kind of independence is that which falls into fatalism and says “We can do nothing about anyway.” Switzerland hopes that the debate over the right China approach can be sat out. “That’s exactly the approach that won’t work.”
The political scientist acknowledges the tricky situation for companies: The increasing reports, for example, about human rights violations in Xinjiang and the associated demands for sustainable supply chains are, of course, “uncomfortable” for companies – but even long before that, there were signs of the path China was going to take, says Weber. The authoritarian development in the People’s Republic has been showing as early as 2007/2008. “That’s why you can’t just say that with Xi Jinping, China has suddenly changed. This is the kind of discussion the country now needs, Weber stresses.
The Swiss economic community, however, wants to continue to focus on rapprochement: “I don’t believe that bashing will lead to an improvement. We are convinced that we can achieve more through dialogue,” says Rudolf Minsch from the umbrella organization Economiesuisse. He stresses a better integration of China into an international community of a post-World War II economic order. “That is our preferred solution,” says the economist. Minsch is aware that this also entails risks: “China’s interests are being pushed very obviously and brashly in some cases.” The fact that critical voices are generally getting louder when it comes to exchanging with China is also seen at the trade association, Minsch emphasizes.
Nevertheless, the Swiss economy will not rely on sanctions. Punitive measures – including the most recent ones between Brussels and Beijing – are always a “political assessment” and more of a “showcase”, says Minsch. In his opinion, they miss the real target: “Sanctions never lead to an improvement locally.”
According to Minsch, economic relations with China are flourishing again this year. In 2020, the Covid crisis caused great difficulties, and supply chains had been temporarily disrupted. But normalization was quick: “We saw an increase in foreign trade in 2020, despite Covid.” And for 2021, things also look very promising, he says. Minsch cites the watch industry, mechanical engineering, textiles, and pharmaceuticals as examples.
Unlike the EU, whose investment agreement with the People’s Republic (CAI) is currently on hold, Switzerland has had a free trade agreement with China since 2014. At the time, the Swiss were the first European country to enter into an agreement with Beijing. Since then, Swiss machinery manufacturers, in particular, have benefited from the agreement with China. Textile machinery manufacturers Rieter, Saurer, and Uster Technologies are also active in Xinjiang. According to a report by SRF, Rieter even uses its customer base for advertisement purposes on its website. These include textile companies Changji Esquel and Aksu Huafu. Both companies have been sanctioned by the US for allegedly using forced labor in production.
Switzerland is also thinking about how supply chains can be made more sustainable and how products manufactured through human rights violations can be avoided. However, the so-called popular initiative on corporate responsibility was last narrowly defeated at the ballot box in November 2020. “We are glad that it was rejected. It would have been a novel form of regulation with enforcement in Swiss courts,” says Minsch of Economiesuisse. The associated susceptibility to abuse would have left companies in Switzerland heavily exposed. A counter-proposal renounces “experimental legal instruments” and is instead based on EU regulations, but goes somewhat further, says Minsch. In general, however, there is a problem: “Control is almost impossible to enforce.”
However, the economist sees the human rights dialogue between Switzerland and China as the right approach. “Switzerland has made its demands known through dialogue, which is the right direction. However, the Covid pandemic abruptly interrupted the exchange. However, Minsch doubts the potential influence of dialogue: “But it would also be presumptuous for Switzerland, as a small country, to dictate China.”
Ever since the initiative on corporate responsibility was rejected, the counter-proposal passed by parliament could come into force this year – provided there is no referendum on it. The referendum deadline expires in July. The counter-proposal would require larger companies to report on issues such as ecology, human rights, and corruption, along the lines of the EU’s supply chain law. Listed companies and unlisted financial services providers with 500 or more employees would be affected. In addition, there would be specific due diligence obligations with regard to child labor and conflict materials. These obligations would then cover the entire supply chain.
Angela Mattli of the Society for Threatened Peoples (STPI) in Switzerland called the counter-proposal on corporate responsibility “toothless”: “It’s nothing more than voluntary reporting for companies in an arbitrary selection of risk sectors.” Mattli also has little to say about the human rights dialogue because its effect is questionable. Actually, the dialogue format should have taken place every year. However, the last dialogue took place in 2018 – long before the start of the Covid pandemic.
“In its relationship with China, Switzerland has so far focused too much on the economy, and human rights were a minor footnote,” says Mattli. The results of the dialogue between Bern and Beijing are now to be reviewed. The fact that dialogue is being evaluated is good and urgently needed, says Mattli. She calls for Switzerland to join the EU sanctions against officials in Xinjiang. In general, she believes more cooperation with Brussels is needed.
The EU could also learn from Switzerland. This is because Switzerland already has experience with Chinese commitments through the free trade agreement, for example, concerning the implementation of promised requirements and core standards of the International Labor Organization (ILO). In the CAI, the Chinese pledged to “strive” to implement and recognize some ILO requirements. Can the EU rely on China’s implementation of these concessions? Mattli has a clear answer to this with regard to the Swiss experience: “At the moment, I don’t think so, no.” What the People’s Republic says are just “pretty words” – but nothing more.
On Friday, the Swiss parliament took a small step towards redefining Sino-Swiss relations. By 13 votes to 12, the Foreign Affairs Committee of the National Council narrowly voted in favor of renegotiating the free trade agreement with China, as the STP announced. With the adoption of the corresponding resolution, the Federal Council should now be instructed to negotiate an additional chapter with the Chinese government on compliance with international standards in the area of human and labor rights. However, it is doubtful whether this will come about, as the commission primarily has an advisory function. It thus resembles a committee of the German Bundestag. The decisive step, out of a supposed neutrality of Switzerland, must come from the government. But there is still a standstill – but this time perhaps externally: Actually, the Minister of Economy and President of the Swiss Confederation Guy Parmelin wanted to travel to Beijing in July, as one of the first political visitors from Europe after the Covid outbreak. However, the plans fell through due to China’s entry regulations: The business delegation would have had to go into quarantine upon arrival.
A rumor that sounds like Donald Trump and his followers started it: The coronavirus may not have come about naturally, but at the Institute of Virology in Wuhan. But this time, it is not Trump who is voicing this suspicion, but his successor Joe Biden. Biden is said to check the facts first before he dares to go public with an issue. But now, he has ordered his intelligence agencies to make “every effort to investigate the origin of the COVID-19 pandemic”. And he no longer rules out the laboratory theory.
The US government has not officially named the source. But rumors are growing that the main informant is none other than Dong Jingwei (董经纬), the former chief of counterintelligence and – should he still be in office – vice minister of the powerful Ministry of State Security (MSS), also known and feared as Guoanbu in China. According to the US news portal Daily Beast, the top spy is said to have already fled with his daughter via Hong Kong to the USA and provided authorities with relevant information, including about China’s biological weapons program. It would be the highest-ranking Chinese defector to the US. So far, these are just rumors. But if they turn out to be true, it would come as a real bombshell. Officially, the US government denies such a defection (China.Table reported).
Born in Zhao County, Hebei Province, near Beijing, Dong Jingwei headed the State Security Department of Hebei Province until 2017. He probably would not have risen to national prominence had he not been one of the masterminds behind the 2010 arrest of four Japanese businesspeople for allegedly recording footage of a military facility. The arrest explicitly targeted the then state and party leader Hu Jintao, whom hardliners within the Chinese Communist Party accused of being too lax in dealing with foreign businesspeople. Hu’s harshest internal critics included Xi Jinping, then still vice party chief.
After Xi ascended to state and party leader, Dong Jingwei’s rise in the security apparatus was unstoppable. In 2018, Dong Jingwei was appointed vice-chief of state security. He also personally became one of Xi Jinping’s closest advisors, and the information he may have provided to the US could accordingly have it all. In addition to early studies of the coronavirus and various scenarios of its spread, he is also said to have revealed which government institutions and organizations were involved. He also allegedly shared the identities of Chinese agents with the US.
The fact that Dong Jingwei and his daughter fled to the US is also confirmed by Han Lianchao, a former employee of the Chinese Foreign Ministry who fled to the US after the suppression of the Tiananmen Square democracy movement in 1989. According to Han, Dong Jingwei’s flight was also a topic of discussion at the meeting between US Secretary of State Antony Blinken and his Chinese counterpart Wang Yi in Alaska in March, adding to the sour mood. Wang had demanded that Dong be returned to China – which Blinken rejected.
However, what clouds the credibility of these reports is that in the US, it is mainly conservative and Trump-friendly media that pick up on the rumors and use them as an opportunity to criticize the Biden administration. For Biden had long not wanted to know anything about the labor theory.
In China itself, Dong Jingwei is mentioned in the Chinese state media only in connection with a seminar at which he urged other intelligence officers to “step up all efforts to hunt down foreign agents and insiders working with ‘anti-Chinese’ forces”. When doubts arise about the whereabouts or health of a cadre, China sometimes responds by publishing recent pictures of the person in state media – a denial with Chinese characteristics.
However, the report does not reveal the location or exact time of the seminar. In addition, on June 23, the government released a picture of Dong Jingwei attending a meeting of the Shanghai Cooperation Organization (SCO). However, it is not clear whether that is really him in the picture. At the very least, he is sitting in the exact same pose as in another picture from the past. Felix Lee
This decade the roles have been reversed: China is coming to Germany as a technologically superior investor. “Europe cannot accomplish the shift to electric vehicles on its own,” Kai-Uwe Wollenhaupt tells China.Table in our Monday interview. In the interview, the European head of battery manufacturer SVOLT explains why his company is starting with cutting-edge technology in Saarland right away, while European industry has mostly only brought the previous generation to China.
Wollenhaupt thus describes nothing less than a turning point in time that should trigger a complete rethink among the public. “The equation ‘China bad, Europe good’ does not fit our global times,” he concludes. “There are many levels on which we encounter China. Some as rivals, others as partners.”
It is the precise dilemma of “partner or rival?” that Switzerland is currently struggling with. Amelie Richter analyses why the overdue adjustment of China policy is so difficult for our neighbor. Even if Switzerland is smaller and does not belong to the EU, the issues discussed in Bern provide a taste of what the new German government will deal with after the election.
Wishing you a pleasant week.
Mr. Wollenhaupt, the number of possible locations for SVOLT‘s investment in Europe ran into the dozens. Why Saarland?
Many factors speak for this. But what has convinced us most is the very agile political environment in which we receive valuable help in implementing our plans thanks to the additional support from SHS Strukturholding Saar.
In what form?
Strukturholding will construct the buildings and infrastructure for the cell factory in Ueberherrn and the module and high-voltage storage factory in Heusweiler. We will discuss what we need, and Strukturholding will then work out how to implement it so that we do not fall into the trap of applying a Chinese solution to European requirements in the first place. In that case, implementation could be significantly delayed. We are currently facing the challenge of adapting the processes that were developed in China to European needs and requirements.
Strukturholding has also made advance payments on behalf of SVOLT and purchased the building plots. They can now decide at their leisure whether they want to take over the sites later or simply lease them. What do you do?
This has not yet been finally decided, but this does not affect the profitability of Strukturholding. The Heusweiler site is being built on the former site of a laminate factory. SHS would also have no problem with a rental solution because that would bring it a reasonable return according to standard market conditions. That’s why my gut feeling tells me that we should lease in Heusweiler and that it would be worthwhile if we became the owner in Ueberherrn. But in the final analysis, it is important that the financing requirements are covered by corresponding returns and that there are corresponding securities so that the acting partners do not take any risks.
In Ueberherrn, the purchase is also worthwhile because the location is in a structurally weak zone, and you can therefore hope for ten percent of the investment sum as a subsidy.
Admittedly, we are happy to take that, of course. Others do the same. Nevertheless, the subsidy was not the only factor in the investment decision. This is only a one-off positive effect. But we have to build a site that is profitable in the long term. Subsidies no longer play a role after a few years. We have not even submitted the final application for the GAW subsidy yet. This has to be prepared precisely because Brussels has the final decision-making authority for such an investment volume. But I assume that this will be successful in our case.
As a result of geopolitical developments, Chinese investments are increasingly viewed critically. Do you sense rejection?
I don’t see that at the Saarland government level. That comes rather from a minority of the population. But that is only a tiny segment, which is partly China-bashing (read in China.Table). These are people who are worried that a colossus is being built there that can’t be touched. This creates fears of environmental damage and high water consumption. To this I say: We will comply with local legal requirements and regulations. No one needs to be afraid. There are entrepreneurial risks, but they exist everywhere. The equation “China bad, Europe good” does not fit into our global times.
The growing tensions between China, the US, and Europe are not a cause for concern for you?
There are many levels on which we encounter China. On some as a rival, on others as a partner. In our industry environment, we tend to refer to it as a partnership. As SVOLT, we are not politically active. Europe cannot achieve the electric turnaround on its own. That’s why this partnership is beneficial. If it were all based on pure rivalry, the venture would have no future. When I talk to colleagues in China, there is also a strong distinction between the relationship with Europe and that with North America. However, I also assume that the relationship with the USA will be less emotional in the future.
Your Chinese competitor CATL is building a site in Thuringia, Tesla wants to produce in Brandenburg, and German carmakers are also creating new capacities. Will Germany become the world’s number one battery production location?
Well, the technology comes from Asia – China, Korea, Japan. There are a lot of people there who have a head start in know-how. Electromobility is being promoted enormously in China, for example. Many start-ups have much shorter development times than we do in Europe. This also happens under a competitive cost structure. In Germany, it’s the OEM in the automotive industry that were used to model cycles of seven years. We have to close the gap here first. That’s why I don’t think we will surpass the technology of the Chinese or Koreans. But if you can positively combine the power and speed in China with the advantages of Europe, you create an extremely competitive company.
What advantages do you want to bring together?
We benefit from solid mechanical engineering and a pool of highly efficient workers who can manage the complexity that battery manufacturing entails. In our future battery cell factory in Überherrn, we will have to manage around 3,500 process parameters successfully. Once a decision has been made in China, the speed of implementation is enormous. It is important to influence the decision-making so that it can be transferred to the European environment, and we can thus benefit from the speed. One of SVOLT’s strengths is its large number of international colleagues. We are not perfect either, but we are continuously working on it. So far, it is working well. Today, we are still a small but rapidly growing team in Europe.
Is there no highly efficient workforce in China?
In China, management is different. The training is also different here in Germany. In Saarland, the structural change also ensures that qualified specialists are easier to find because other companies here also have this need. The demand creates a larger supply. And if you compare the staff turnover between China and Europe, then it is certainly the case that here we are more likely to succeed in keeping the growing quality that we train our employees to have in the company. It is not for nothing that Germany is a successful exporter despite its high-cost structure.
And yet, you won’t go into series production of batteries until the end of 2023 at the earliest. Will you be the victim of German bureaucracy?
Of course, not everything happens at the speed we would like it to, in Europe. If you build a factory in China, it takes a year and a half. Here we need three. But if you know that beforehand, it’s not too much of a problem.
When the time comes, will German SVOLT batteries be better than Chinese ones?
No, we are a global company. The quality must not differ. The audits are carried out by international teams that apply the same standards everywhere.
The industry does not like to talk about the reject rate, which is said to be around 30 percent. Do they hope to reduce the rate and produce a higher number of top-quality batteries in Germany?
I’d be very happy if that were the case. However, I can tell a lot on PowerPoint. I know my colleagues in China. They have a head start in terms of experience, with which they have reached a level that we have yet to achieve here. But we will make every effort to ensure that at some point, we can set a benchmark in the competition within the company.
And then also produce for the Chinese market?
No, it won’t get that far. But we have to be competitive with the batteries that are coming to Europe from the Chinese market. This is also possible because the Chinese provide us with the latest technology here in Germany. In the past, we Europeans, on the other hand, have only ever built up second-generation technology in our local production facilities in China…
…because German companies have to fear that their technology will be stolen?
To prevent this, SVOLT plans to build the most modern factory with the best technology currently available in Ueberherrn. We are not building copy-and-paste here. Additionally, SVOLT also brings technologies such as artificial intelligence.
SVOLT CEO Yang Hongxin predicts that because of the EV boom, battery manufacturers will only be able to meet 60 to 80 percent of demand in the coming years. Has the industry slept through the boom?
No, nobody slept through anything. SVOLT certainly didn’t. We had four-gigawatt hours of battery capacity installed towards the end of 2019 and are now already at four and a half times that. We plan to have over 200 gigawatt-hours installed by 2025. It is rather that the environment has been surprised by the acceptance that electromobility is currently experiencing. It is greater than we as an industry can keep up within the short term. That’s why it will first be a matter of managing the shortage. Anyone who has the opportunity to reserve capacity today should do so. The shortage will continue to accompany us for the time being.
You have announced a drop in prices from the current level of around €100 per kilowatt-hour to just €65. But if demand will be greater than supply, why shouldn’t prices rise?
This is primarily due to increased volumes and advancing production technology. By 2025, we will have quadrupled the speed of our assembly processes compared to 2019. In addition, there are developments such as the wet coating process, which is being substituted with dry coating technologies. For this, we need significantly less space and energy. Today, there are also fewer module solutions than before, but there are significant developments to apply the cell-to-pack process. This increases utilization so that a greater amount of energy can be stored in the same installation space. Furthermore, fewer components are required. In the next step, there are already considerations for cell-to-chassis solutions, in which the batteries can be integrated directly into the car bodies.
Will you give the industry a price war with support from China that will kill off battery manufacturing by German OEMs from the auto industry?
No, the future localization rate in Europe is more than 60 percent. You can’t achieve that in China. Because of the complex supply chain, it also doesn’t make sense to deliver from China in the long term. We are only doing this now until we have built up local capacities in Europe.
The new anti-sanctions law in China could force companies to set up a supply chain independent of the rest of the world in parallel for the Chinese market. Are you preparing for such a scenario?
For us, the question of different supply chains comes up from a different perspective. For battery construction, we need many sensitive materials that have to be stored in a demanding environment. You can’t pack all of that on a plane, not even on a train, but most of it has to be shipped. That means the supply chain has a response time of about six weeks. So if there’s a quality problem, six weeks of capacity has to be replaced. That is very expensive. The regulations on localization quotas do the rest. Conversely, this also means that more and more successful Chinese suppliers will come to Europe. With Battery cells “local for local” is also a necessity that arises from the complexity of the materials.
In other words, stabilizing supply chains is becoming an ever-greater challenge?
It is in our industry because the development processes are so fast and we as a company have to keep up. That can sometimes make you dizzy. It’s all a “moving target”. But we try to exert as much influence as possible by producing the material for sensitive areas ourselves. Company participation in the mining sector also helps us. But we, as SVOLT Europe, are still at the beginning. In contrast, our partners in China are already established, and there is still a need for further action in Europe.
And all that effort for ten years until the next drive comes along.
There will be different drives in the future. It would be too naive to invest in several terawatts now with this short horizon. But it would also be wrong to think there is nothing else. But there is no good or bad. Where hydrogen makes sense, it will prevail. But the safety aspect, which you get to grips with in batteries, is still ahead of hydrogen solutions. We are not afraid of other drives. On the contrary, they will be a very fruitful addition that will by no means make the battery superfluous.
Kai-Uwe Wollenhaupt has been President of the European subsidiary of the Chinese battery manufacturer SVOLT for two years. Previously, the manager held management positions at SCS Stahlschmidt Cable Systems, the service provider PSM International and the steel chemicals specialist SKW.
SVOLT from Changzhou is one of the largest manufacturers of EV batteries in China and is rapidly gaining market share globally. The company spun off from vehicle manufacturer Great Wall in 2018 and is currently investing in Saarland.
It now has been about three months since the EU imposed sanctions on four officials and an organization for human rights violations in Xinjiang. The European non-EU states Norway and Iceland joined the EU sanctions, but the Swiss government remained silent. The media criticized Switzerland for dragging its feet on China sanctions and is taking a conspicuously long time to react. Only a working group had been formed. Do the Swiss lack tactics for dealing with the growing strength of the People’s Republic? Calls for a new course in Switzerland’s China strategy are growing in civil society and in parliament.
For Switzerland, such considerations are even more difficult than for Germany. A country with 8.5 million inhabitants is pitted against a nation of billions. Even those who are as technologically and financially strong as Switzerland perceive this as an extreme imbalance. At the same time, the country has consciously intertwined itself economically with China in recent years. What was considered a clever strategy at the time is now creating problems.
According to critics, the previous concept has led to a dead-end: For too long, Switzerland has given clear priority to economic relations, says political scientist and Swiss China expert Ralph Weber. Other issues, such as Human Rights, were left out of the equation. As a result, Switzerland has maneuvered itself into a situation in which “increasing economic integration has now also limited its own sphere of action,” says Weber in an interview with China.Table. It is becoming increasingly difficult to align economic relations with one’s own values and ideas. A dilemma for the Swiss: “We are in a very tricky situation because while we want to continue to deepen economic ties, the People’s Republic of China, on the other hand, is taking a more confrontational approach around the globe and Swiss civil society and parliament are increasing the pressure on both the government and the economy”. In Weber’s opinion, not having an opinion or a position is no longer an option: The myth of neutral Switzerland must finally be “shaken” as far as China is concerned. Weber pointed out: “One could polemically say: What kind of independence is that which falls into fatalism and says “We can do nothing about anyway.” Switzerland hopes that the debate over the right China approach can be sat out. “That’s exactly the approach that won’t work.”
The political scientist acknowledges the tricky situation for companies: The increasing reports, for example, about human rights violations in Xinjiang and the associated demands for sustainable supply chains are, of course, “uncomfortable” for companies – but even long before that, there were signs of the path China was going to take, says Weber. The authoritarian development in the People’s Republic has been showing as early as 2007/2008. “That’s why you can’t just say that with Xi Jinping, China has suddenly changed. This is the kind of discussion the country now needs, Weber stresses.
The Swiss economic community, however, wants to continue to focus on rapprochement: “I don’t believe that bashing will lead to an improvement. We are convinced that we can achieve more through dialogue,” says Rudolf Minsch from the umbrella organization Economiesuisse. He stresses a better integration of China into an international community of a post-World War II economic order. “That is our preferred solution,” says the economist. Minsch is aware that this also entails risks: “China’s interests are being pushed very obviously and brashly in some cases.” The fact that critical voices are generally getting louder when it comes to exchanging with China is also seen at the trade association, Minsch emphasizes.
Nevertheless, the Swiss economy will not rely on sanctions. Punitive measures – including the most recent ones between Brussels and Beijing – are always a “political assessment” and more of a “showcase”, says Minsch. In his opinion, they miss the real target: “Sanctions never lead to an improvement locally.”
According to Minsch, economic relations with China are flourishing again this year. In 2020, the Covid crisis caused great difficulties, and supply chains had been temporarily disrupted. But normalization was quick: “We saw an increase in foreign trade in 2020, despite Covid.” And for 2021, things also look very promising, he says. Minsch cites the watch industry, mechanical engineering, textiles, and pharmaceuticals as examples.
Unlike the EU, whose investment agreement with the People’s Republic (CAI) is currently on hold, Switzerland has had a free trade agreement with China since 2014. At the time, the Swiss were the first European country to enter into an agreement with Beijing. Since then, Swiss machinery manufacturers, in particular, have benefited from the agreement with China. Textile machinery manufacturers Rieter, Saurer, and Uster Technologies are also active in Xinjiang. According to a report by SRF, Rieter even uses its customer base for advertisement purposes on its website. These include textile companies Changji Esquel and Aksu Huafu. Both companies have been sanctioned by the US for allegedly using forced labor in production.
Switzerland is also thinking about how supply chains can be made more sustainable and how products manufactured through human rights violations can be avoided. However, the so-called popular initiative on corporate responsibility was last narrowly defeated at the ballot box in November 2020. “We are glad that it was rejected. It would have been a novel form of regulation with enforcement in Swiss courts,” says Minsch of Economiesuisse. The associated susceptibility to abuse would have left companies in Switzerland heavily exposed. A counter-proposal renounces “experimental legal instruments” and is instead based on EU regulations, but goes somewhat further, says Minsch. In general, however, there is a problem: “Control is almost impossible to enforce.”
However, the economist sees the human rights dialogue between Switzerland and China as the right approach. “Switzerland has made its demands known through dialogue, which is the right direction. However, the Covid pandemic abruptly interrupted the exchange. However, Minsch doubts the potential influence of dialogue: “But it would also be presumptuous for Switzerland, as a small country, to dictate China.”
Ever since the initiative on corporate responsibility was rejected, the counter-proposal passed by parliament could come into force this year – provided there is no referendum on it. The referendum deadline expires in July. The counter-proposal would require larger companies to report on issues such as ecology, human rights, and corruption, along the lines of the EU’s supply chain law. Listed companies and unlisted financial services providers with 500 or more employees would be affected. In addition, there would be specific due diligence obligations with regard to child labor and conflict materials. These obligations would then cover the entire supply chain.
Angela Mattli of the Society for Threatened Peoples (STPI) in Switzerland called the counter-proposal on corporate responsibility “toothless”: “It’s nothing more than voluntary reporting for companies in an arbitrary selection of risk sectors.” Mattli also has little to say about the human rights dialogue because its effect is questionable. Actually, the dialogue format should have taken place every year. However, the last dialogue took place in 2018 – long before the start of the Covid pandemic.
“In its relationship with China, Switzerland has so far focused too much on the economy, and human rights were a minor footnote,” says Mattli. The results of the dialogue between Bern and Beijing are now to be reviewed. The fact that dialogue is being evaluated is good and urgently needed, says Mattli. She calls for Switzerland to join the EU sanctions against officials in Xinjiang. In general, she believes more cooperation with Brussels is needed.
The EU could also learn from Switzerland. This is because Switzerland already has experience with Chinese commitments through the free trade agreement, for example, concerning the implementation of promised requirements and core standards of the International Labor Organization (ILO). In the CAI, the Chinese pledged to “strive” to implement and recognize some ILO requirements. Can the EU rely on China’s implementation of these concessions? Mattli has a clear answer to this with regard to the Swiss experience: “At the moment, I don’t think so, no.” What the People’s Republic says are just “pretty words” – but nothing more.
On Friday, the Swiss parliament took a small step towards redefining Sino-Swiss relations. By 13 votes to 12, the Foreign Affairs Committee of the National Council narrowly voted in favor of renegotiating the free trade agreement with China, as the STP announced. With the adoption of the corresponding resolution, the Federal Council should now be instructed to negotiate an additional chapter with the Chinese government on compliance with international standards in the area of human and labor rights. However, it is doubtful whether this will come about, as the commission primarily has an advisory function. It thus resembles a committee of the German Bundestag. The decisive step, out of a supposed neutrality of Switzerland, must come from the government. But there is still a standstill – but this time perhaps externally: Actually, the Minister of Economy and President of the Swiss Confederation Guy Parmelin wanted to travel to Beijing in July, as one of the first political visitors from Europe after the Covid outbreak. However, the plans fell through due to China’s entry regulations: The business delegation would have had to go into quarantine upon arrival.
A rumor that sounds like Donald Trump and his followers started it: The coronavirus may not have come about naturally, but at the Institute of Virology in Wuhan. But this time, it is not Trump who is voicing this suspicion, but his successor Joe Biden. Biden is said to check the facts first before he dares to go public with an issue. But now, he has ordered his intelligence agencies to make “every effort to investigate the origin of the COVID-19 pandemic”. And he no longer rules out the laboratory theory.
The US government has not officially named the source. But rumors are growing that the main informant is none other than Dong Jingwei (董经纬), the former chief of counterintelligence and – should he still be in office – vice minister of the powerful Ministry of State Security (MSS), also known and feared as Guoanbu in China. According to the US news portal Daily Beast, the top spy is said to have already fled with his daughter via Hong Kong to the USA and provided authorities with relevant information, including about China’s biological weapons program. It would be the highest-ranking Chinese defector to the US. So far, these are just rumors. But if they turn out to be true, it would come as a real bombshell. Officially, the US government denies such a defection (China.Table reported).
Born in Zhao County, Hebei Province, near Beijing, Dong Jingwei headed the State Security Department of Hebei Province until 2017. He probably would not have risen to national prominence had he not been one of the masterminds behind the 2010 arrest of four Japanese businesspeople for allegedly recording footage of a military facility. The arrest explicitly targeted the then state and party leader Hu Jintao, whom hardliners within the Chinese Communist Party accused of being too lax in dealing with foreign businesspeople. Hu’s harshest internal critics included Xi Jinping, then still vice party chief.
After Xi ascended to state and party leader, Dong Jingwei’s rise in the security apparatus was unstoppable. In 2018, Dong Jingwei was appointed vice-chief of state security. He also personally became one of Xi Jinping’s closest advisors, and the information he may have provided to the US could accordingly have it all. In addition to early studies of the coronavirus and various scenarios of its spread, he is also said to have revealed which government institutions and organizations were involved. He also allegedly shared the identities of Chinese agents with the US.
The fact that Dong Jingwei and his daughter fled to the US is also confirmed by Han Lianchao, a former employee of the Chinese Foreign Ministry who fled to the US after the suppression of the Tiananmen Square democracy movement in 1989. According to Han, Dong Jingwei’s flight was also a topic of discussion at the meeting between US Secretary of State Antony Blinken and his Chinese counterpart Wang Yi in Alaska in March, adding to the sour mood. Wang had demanded that Dong be returned to China – which Blinken rejected.
However, what clouds the credibility of these reports is that in the US, it is mainly conservative and Trump-friendly media that pick up on the rumors and use them as an opportunity to criticize the Biden administration. For Biden had long not wanted to know anything about the labor theory.
In China itself, Dong Jingwei is mentioned in the Chinese state media only in connection with a seminar at which he urged other intelligence officers to “step up all efforts to hunt down foreign agents and insiders working with ‘anti-Chinese’ forces”. When doubts arise about the whereabouts or health of a cadre, China sometimes responds by publishing recent pictures of the person in state media – a denial with Chinese characteristics.
However, the report does not reveal the location or exact time of the seminar. In addition, on June 23, the government released a picture of Dong Jingwei attending a meeting of the Shanghai Cooperation Organization (SCO). However, it is not clear whether that is really him in the picture. At the very least, he is sitting in the exact same pose as in another picture from the past. Felix Lee
