France startup Verkor is building a gigafactory in Dunkirk to mass-produce battery cells for 300 000 electric cars each year

Benoît Lemaignan had an epiphany in the autumn of 2018. Just starting out as an investment manager at Meridiam, he received a pitch from Northvolt, a Swedish company seeking billions of euros to produce batteries for electric vehicles.

“Wow, these guys are a little bit crazy,” Lemaignan thought. “But this is exactly what needs to be done for Europe.”

© Verkor

Verkor cofounder and Chief Executive Officer Benoît Lemaignan.

That moment planted the seed for Verkor. Lemaignan and five others founded the French battery company in July 2020. (The startup’s name is a reference to the Vercors mountain range, which overlooks Lemaignan’s native Grenoble.) Growth has been swift.

“It really began as a local project,” says Olivier Kueny, a loan officer at the European Investment Bank. “But the company grew very fast, and they attracted talents for their technical team from all over the world—former employees from Tesla, General Electric, LG Chem, Samsung, Apple, Schneider Electric, Renault, Saft, and others.”

© Verkor

The Verkor Innovation Centre in Grenoble, France. Some 500 employees work at the site, and 1 500 to 2 000 additional jobs will be created at the gigafactory in Dunkirk.

An important signal

By 2021, Verkor had signed a long-term partnership with Renault to supply 12 gigawatt-hours of batteries annually, starting in 2025, for the French carmaker’s upper-end electric vehicles, such as SUVs, sports vehicles and vans. Renault is also a shareholder in Verkor and has helped it develop its modules. Verkor will produce an additional four gigawatt-hours annually for other customers. It will manufacture cells. When packed into modules, they will be delivered to the company’s clients and stacked into battery packs.

But it’s expensive to build the huge gigafactories where electric vehicle batteries are made—as Lemaignan knew from Northvolt’s massive fundraising. The European Battery Alliance, an initiative introduced in 2017 to foster the battery industry in Europe, and InnoEnergy, an international sustainable energy knowledge and innovation community and one of Verkor’s first financial backers, connected the company to the European Investment Bank, the European Union’s financing arm.

The European Investment Bank initially invested €49 million of venture debt in 2022 to support the construction of the Verkor Innovation Centre in Grenoble, which includes a research and development centre and a pilot manufacturing line for battery cells. The pilot plant is crucial for Verkor to progress through the stringent approval requirements of carmakers. Its process will be replicated on a much larger scale in the gigafactory under construction in Dunkirk, a port city in the northern French region of Hauts-de-France.

“The initial loan was an important signal to the market, because the European Investment Bank sees so many projects, it’s reassuring for other investors,” says Georges-Marie Desmoulière, a structured finance associate at Verkor. “It demonstrated that the Bank’s teams were open to studying projects in their very early stages of development. The EIB specialists helped us understand exactly when and how the Bank could support us, and with what tools.”

Expanding the EU battery industry

To meet its emissions reduction goal, Europe needs to dramatically increase its battery production capacity to between 600 and 800 gigawatt hours by 2030, from 78 gigawatt hours at the end of 2021.

China is the global leader in battery manufacturing for electric vehicles. Europe, with less than 10% of global production, lags behind.

Verkor is the third European battery manufacturer to build a gigafactory (though there are other gigafactories in Europe that are owned by Asian companies). The French company ACC-Automotive Cells Company has a gigafactory in the same region as Verkor’s. And, as part of the effort to increase European battery production, the European Investment Bank approved its third loan package to Northvolt, this time for over €1 billion, in early 2024.

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© Avantpropos Architectes

Artist’s rendition of the Verkor gigafactory in Dunkirk, France.

From nothing to €2 billion

After raising an initial €250 million for its innovation centre in Grenoble, Verkor was quickly able to bring in more funds, including €650 million in state subsidies under the France 2030 plan. The plan is intended to help the French industry catch up by investing massively in innovative technologies and the ecological transition. The subsidies included €60 million from the Hauts-de-France region and €30 million from Dunkirk.

“They began in 2020, and in four years they went from nothing to raising €2 billion for building a massive plant,” says Kueny, who worked on the European Investment Bank's Verkor deal. “This operation checks all the right boxes. It’s an innovative European startup, it facilitates the green transition of the European automotive sector and it contributes to Europe’s global competitive position in a key sector.”

In April 2024, the European Investment Bank approved another €270 million in direct loans to Verkor, to help build the company’s gigafactory in Dunkirk, with the support of InvestEU. In addition, the Bank plans to sign intermediated loans with participating commercial banks that could bring its total financing of the project to €400 million.

Verkor also received financing from 16 other banks, under partial guarantee from France’s public investment bank, Banque Publique d’Investissement, known as BPI. Another French public institution, the Caisse des Dépôts et Consignations – Banque des Territoires, also provided a €150 million junior debt loan for the project.

Market risks, technology risks

All this investment is not without risk.

“Raising billions of equity and debt financing in the electric vehicle battery market is not simple for startups like Verkor,” says Kueny. “Demand for electric cars and prices of raw materials are very volatile, and these mega-projects face technology, market and construction risks that make the structuring of finance a delicate matter for sponsors and lenders.”

One reason for the decrease in demand is the ending of subsidies and tax benefits for the purchase of electric vehicles in many European countries. Another is the lack of charging infrastructure throughout Europe. (About 70% of the continent’s charging stations are concentrated in France, Germany and the Netherlands).

But Lemaignan is not concerned. “Maybe growth is slowing down, but not by much,” he says. “And whatever happens, the market share of electric vehicles is expected to be 25% by 2025.”

Competitive sector

Batteries account for between 30% and 50% of an electric vehicle’s cost, and electric vehicles are still more expensive than comparable fuel cars. Carmakers are working to reduce the cost, so that European-made electric cars can be competitive compared to fuel cars and Asian-made electric vehicles.

“It is a very competitive sector,” says Jonas Wolff, a lead engineer at the European Investment Bank. “There is a technology risk, because manufacturers are constantly pushing the boundaries to get a bit more out of the cells, so they can lower their price.”

How do they do this?

The cathode, a key component of a lithium-ion battery, for example, is made of a mixture of nickel, manganese and cobalt with some lithium and other metals. “The recipe for this mixture is proprietary,” Wolff says.

The metals are expensive and highly volatile, with complex supply chains and extraction and manufacturing processes. The trend is to reduce the amount of expensive and volatile metals in the mix to reduce costs and increase price stability. There are also compliance considerations linked to the supply chains, which are often located beyond the European Union.

“We try to have a local production of material and then extend it to Europe and beyond,” says Lemaignan. “Some materials will still come from Africa, South America, and Asia. But typically, our lithium supply will come from Europe. We’ll have some nickel supply in Europe and some cobalt supply from Morocco. We are developing these value chains together with Renault.”

Batteries and jobs created

The gigafactory’s location near Dunkirk port will facilitate the import of raw materials and the export of finished products to Renault’s factories. With four production lines, the gigafactory is expected to produce battery cells for up to 300 000 vehicles annually. The project is also expected to create 1 500 to 2 000 jobs in Dunkirk by 2030.

The gigafactory’s construction is advancing quickly, says Desmoulière of Verkor. “The machines are expected to arrive in June. We’ll have some of the site acceptance tests in the coming months, and the delivery of finished products to Renault should begin in the second half of 2025.”