Northvolt flags European batteries’ growing pains
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
LONDON, July 5 (Reuters Breakingviews) -A setback at one of the most valuable startups in Europe is exposing the region’s struggle to build homegrown battery champions. Swedish startup Northvolt, last valued at $12 billion, launched a strategic review after BMW BMWG.DE cancelled a $2 billion contract. The EU's conflicting green strategies and a glut of cheap cells from China mean Northvolt is not the only battery maker in Europe having to scale back its ambitions.
Northvolt looks like a natural battery champion. Its ability to power its Swedish factory with renewable hydroelectric power should make it appealing to environmentally-conscious carmakers. It has attracted over $15 billion in debt and equity funding from investors such as BlackRock BLK.N and Volkswagen VOWG_p.DE. Europe’s eagerness to create a homegrown electric vehicle supply chain has also helped, with the European Commission approving a 902 million euro grant from Germany in January.
But even with this flood of capital, Northvolt is struggling to manufacture high-quality batteries at scale. The Swedish group’s factories, including one in Skelleftea near the Arctic Circle, have failed to hit their annual target of 16 gigawatt hours of power. Analysts at Rho Motion reckon the total output last year may have been as low as 80 megawatt hours, although a person familiar with the matter says that production has increased this year. The longer than expected delivery time explains why BMW has had to cancel a contract and decided to source lithium-ion batteries from other suppliers instead. While the BMW contract made up less than 5% of Northvolt’s $50 billion order book, it’s a sign of a wider problem: Northvolt on Tuesday said it would review its timeline for rolling battery factories across Europe and Canada.
The teething pains are happening at a time when Chinese battery makers are flooding the continent with cheap products, and grabbing more market share. Half of the batteries deployed in electric vehicles sold in Europe came from China last year, according to data provider Rho Motion. One third of an electric vehicle’s cost comes from batteries, of which those from China are one-third cheaper than European made ones, according to Fastmarkets.
These problems may become more acute with demand for electric vehicles flatlining. EV sales in the EU grew just 3% in May compared with a year earlier, BNP Paribas data shows. That may discourage European battery makers from building more capacity. In June, ACC, a joint venture between Stellantis STLAM.MI and Mercedes-Benz MBGn.DE put plans to build another two battery factories in Germany and Italy on hold.
Europe’s muddled approach doesn’t help. The European Commission has slapped tariffs on Chinese electric vehicles, but failed to impose duties on Middle Kingdom batteries. And it is allowing Chinese and Korean companies such as CATL 300750.SZ and LG Energy Solutions 373220.KS to build more factories in Europe. That may be a necessary step to get more electric vehicles on the road. But it means Brussels’ hope of nurturing homegrown battery champions looks increasingly like a pipe dream.
Follow @karenkkwok on X
CONTEXT NEWS
Swedish lithium-ion battery manufacturer Northvolt said on July 2 it was conducting a strategic review, as it grapples with a series of setbacks including the loss of a contract with BMW.
"A strategic review is underway at Northvolt, to be concluded in the autumn, involving evaluation of timelines and capital allocation to ensure we are pursuing the most effective build-out of capacity possible," the company said in a statement.
Northvolt's first factory in Skelleftea, Sweden, has not yet reached its full production capacity, and a planned increase in output is behind schedule. The company now expects the facility to reach full capacity in 2026.
German premium carmaker BMW on June 20 said it had cancelled a 2 billion euro order for battery cells for its electric vehicles with Northvolt.
"Northvolt and the BMW Group have jointly decided to focus Northvolt's activities on the goal of developing next-generation battery cells. The BMW Group continues to have a strong interest in establishing a high-performance manufacturer of circular and sustainable battery cells in Europe," said BMW.
Manufacturing location of batteries used in European-sold EVs in 2023 Manufacturing location of batteries used in European-sold EVs in 2023 https://reut.rs/4eNkpTC
Editing by Neil Unmack and Streisand Neto
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.
