Last week, this correspondent brought you an article from Australia about how China has captured 80% of the world’s solar market, all powered along by its coal-fired economy.
Now, it seems, Europe is on the brink of losing the EV battery market to China, too. According to the Telegraph, Europe’s electric car market rebellion is claiming its biggest scalp. There’s no reason to gloat though. The vast sums of money poured into the Swedish-based firm Northvolt, which has now filed for bankruptcy protection, have come from “investors, bondholders, pension funds and European governments since it was founded in 2016”, to say nothing of ceding yet more market dominance and strategic autonomy to China.
The Daily Sceptic flagged up Northvolt’s precarious situation back in September.
Northvolt is now down to its last $30 million and the CEO Peter Carlsson has stood down:
Northvolt has blamed its downfall on foundering demand for electric vehicles (EVs) across Europe. Its “capital structure and business plan were premised on the assumption that the electric vehicle industry would continue its pattern of consistent growth”, said Scott Millar, a restructuring adviser at Teneo, in the company’s court pleading.
As investor fervour for EVs reached its peak during the pandemic, Northvolt expanded aggressively across Europe, the United States and Canada, with plans for a network of gigafactories, as the facilities that manufacture car batteries are known.
However, the bottom fell out of the global market for battery-powered cars in 2023 as inflation and hesitant consumer demand led to a slowdown – and, in some cases, a slump – in EV sales.
Analysts at Rho Motion pared back their predictions for EV sales by a quarter, to 8.3 million by 2030. In Europe, home to Northvolt’s biggest clients, demand has been particularly weak. Sales are down 3% so far this year, according to Rho Motion. In Germany, they have fallen by 18%.
As this graph shows, the only real beneficiary of the EV market has been China:
Volkswagen, a major Northvolt customer and shareholder, last month announced plans to shut three factories in Germany, the first closures in its home market in its history.
At the same time, Chinese carmakers have been undercutting their European rivals by flooding the market with cheaper EVs that run on Chinese batteries. This piled pressure on Northvolt, which had aimed to set itself apart from rivals by developing clean batteries with renewable hydropower.
Even though it was producing 60,000 batteries per week and had $50 billion in future orders, some of Northvolt’s customers, such as BMW, reduced investments in the company as demand slowed. Government investors, meanwhile, withdrew billions in planned funding after Northvolt scaled back its plans for new factories.
The bankruptcy filing buys Northvolt time to salvage its business. Scania, a core customer owned by Volkswagen, has provided $100 million in debt-in-possession financing, a kind of emergency loan, while it has also unlocked $145 million in cash collateral.
“Northvolt’s liquidity picture has become dire,” Millar said in a court filing. It has debts of nearly $6 billion and has already wound down or pulled the plug on several divisions. Investors such as Baillie Gifford, BMW and Goldman Sachs all face having their stakes wiped out by its bankruptcy.
At least the CEO has had the dignity to stand down, admitting “we were overambitious”. But the problems run deeper:
While Northvolt has blamed its demise on the disintegration of EV demand, industry experts argue that mismanagement, inflated expectations and a lack of government investment in electrification are also to blame.
Reports have also suggested an over-reliance on Chinese machinery and engineers meant Northvolt lacked in-house expertise.
Andy Palmer, the former Aston Martin Chief Executive, says: “The biggest issue is that batteries are not easy to make and Northvolt haven’t satisfied the supply demands of their customers – that is a management issue.” James Frith, Europe head at investment firm Volta Energy Technologies, says: “Europe needs to rethink how it supports a nascent sector before China eats up the entire value chain.”
If Northvolt cannot be revived, Europe will cede what little gains it had made against China in building up its own battery supply chain. While EV demand has stalled, mandates to sell more green cars mean demand for batteries will grow. If they are not made in factories in Europe, the bloc will be perilously exposed to China.
“Europe needs battery capacity,” says Simon Moores, Chief Executive of Benchmark Mineral Intelligence. “The pendulum of industrial battery power has just swung east towards China.”
Yahoo! News has more.
There’s more on the story from Reuters, which includes this devastating observation:
“The biggest issue is that batteries are not easy to make and Northvolt haven’t satisfied the supply demands of their customers – that is a management issue,” said Andy Palmer, founder of consultancy Palmer Automotive said.
“The Chinese are technologically 10 years ahead of the West in batteries. That’s a fact,” he said.
At least eight companies have postponed or abandoned EV battery projects in Europe this year, including China’s Svolt and joint venture ACC, led by Stellantis and Mercedes-Benz.
In modern-day technological terms, 10 years might as well be 100 years.
Regardless of your views on EVs, the outlook is grim, and the strategic implications for Europe and Britain potentially catastrophic as they prematurely run down and outlaw older technologies, sacrificing it all on the altar of the Green Dream.
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