Northvolt crisis may be make or break for Europe's EV battery ambitions
Northvolt co-founder urges EU not to give up EV battery dream
Firm has filed for bankruptcy protection, needs $1.0-$1.2 bln
EU hopes hit by weak EV sales, production issues, China strength
By Marie Mannes, Alessandro Parodi and Stine Jacobsen
STOCKHOLM/GDANSK, Nov 22 (Reuters) -Northvolt's financial collapse deals a blow to Europe's plan to set up its own battery industry to power electric cars, stirring a debate about whether it needs to do more to attract investment as startups struggle to catch up with Chinese rivals.
Europe's biggest hope for an electric vehicle battery champion filed for U.S. Chapter 11 bankruptcy protection on Thursday after talks with investors and creditors including Volkswagen and Goldman Sachs for funding failed.
The Swedish company, whose motto is "make oil history", has received more than $10 billion in equity, debt and public financing since its 2016 start-up. Volkswagen and Goldman Sachs each own about one fifth of its shares.
Northvolt said on Friday it needed $1.0-$1.2 billion in new funds under the restructuring process, which it hopes will end by the end of March.
In recent months, it has shrunk the business and cut jobs in a bid to shore up its finances. But it has struggled to produce sufficient volumes of high-quality batteries, and lost a 2 billion euro ($2.1 billion) contract from BMW BMWG.DE in June.
That has left Europe's ambitions to build its own battery industry looking a distant dream.
In recent years, Northvolt led a wave of European startups investing tens of billions of dollars to serve the continent's automakers as they switch from internal combustion engines to electric vehicles.
But growth in EV demand is moving at a slower pace than many in the industry projected, and China has taken a huge lead in powering EVs, controlling 85% of global battery cell production, International Energy Agency data shows.
Making batteries and cells, the units that store and convert chemical energy into electricity, is a delicate process and doing so at scale is a challenge for any battery maker.
Northvolt has missed some in-house targets and curtailed production at its battery cells plant in northern Sweden, underscoring the difficulties, Reuters reported on Monday.
"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 STLAM.MI and Mercedes-Benz MBGn.DE.
In 2024, Europe's battery pipeline capacity out to 2030 has fallen by 176 gigawatt-hours, according to data firm Benchmark Minerals. That's equivalent to almost all the current installed capacity in Europe, according to Reuters calculations.
RETHINK
Some executives say Europe should do more to attract and support home-grown projects so they can compete with Chinese rivals such as CATL 300750.SZ and BYD 002594.SZ.
"Europe needs to rethink how it supports a nascent sector before China eats up the entire value chain, which is due to smart planning," said James Frith, European head of Volta Energy Technologies, which specialises in battery and energy storage technology.
Among its $5.8 billion in debts, Northvolt owes the European Investment Bank (EIB) some $313 million.
EIB vice president Thomas Östros said it had been a constructive partner to Northvolt, but it needed to safeguard the EIB and EU's interests.
"It remains the case that Europe has a strategic interest in a European battery industry for electric cars and we will follow developments very closely. But it is much to early to say what the outcome will be," he said.
The Swedish government has repeatedly said it does not plan to take a stake in Northvolt.
On Friday, Northvolt's outgoing CEO and co-founder Peter Carlsson said he was a "little worried" Europe is giving up on its dream of competing with China.
He said Europe would regret it in 20 years time if it retreated.
"It's not a straight journey and right now, we're all in a bit of a down in that journey where there's more hesitations, there's more questions on the speed of the transition from the carmakers, from policymakers, from the investor community," he told reporters in a call.
Europe's downsized gigafactory network https://reut.rs/4fpIpvZ
Europe's downsized gigafactory network https://reut.rs/4eyoSbB
Reporting by Marie Mannes in Stockholm, Stine Jacobsen in Copenhagen and Alessandro Parodi in Gdansk. Additional reporting by Simon Johnson in Stockholm. Writing by Josephine Mason. Editing by Mark Potter
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
