The EU’s Battery Ambitions
Europe’s battery industry is in trouble.
Swedish battery manufacturer and developer Northvolt, Europe’s biggest battery start-up and best hope for homegrown batteries, recently announced it was cutting 1600 or 20% of its jobs.
The EU aimed to increase its share of homemade batteries to avoid being overly dependent on South Korea and most importantly China which accounts for 80% of global shipments of key battery components.
To reduce this dependency, companies like Volkswagen and BMW who need batteries for electric vehicles and investors like the European Investment Bank, have invested over 15 billion dollars in Northvolt since it started in 2017. This made it the European startup most invested in. In fact, Volkswagen owns 20% of Northvolt’s share.
Northvolt’s Problems
But despite this massive investment and the need for batteries, Northvolt suffered a 1.2 billion euro loss in 2023 and is cutting jobs. Northvolt and other European battery manufacturers are struggling due to four main reasons:
- First, global battery production capacity is a lot higher than the forecasted demand. According to Bloomberg, demand for batteries for electric vehicles and stationary storage was around 950 Gigawatt hours last year, while global production capacity was almost three times as big at 2600 Gigawatt hours. In fact, China already makes as many batteries as the world needs.
- On top of this the demand for electric vehicles in Europe is high, but lower than expected with sales falling to the lowest numbers in three years.
- They’re also struggling to keep up with the global competition. Chinese and Korean Companies like CATL, BYD and LG have been in business for decades, have more know-how and can scale up production easier. In fact, Northvolt relies on hundreds of Korean and Chinese workers to install and operate Chinese machines.
- And finally they are having a hard time increasing production capacity, which leads to production delays. This is why BMW cancelled a 2 billion euro order, which went to Korean Samsung SDI instead.
In a bid to recover, Northvolt is trying to cut costs and increase revenue:
- It’s selling stockpiles of critical raw materials that are used for the batteries, in an effort to get more cash.
- It’s cutting in research and development, cutting 400 jobs.
- It is looking to reorganise and spend more effort and money on large scale battery cell production while lowering costs
- Finally it wants the Swedish government to step in – in otherwords a bailout – something it has so far refused to do.
Europe’s Battery Problems are Systemic
And it’s not the only European battery manufacturer facing headwinds: Automotive Cells Company (ACC), with Mercedes-Benz as shareholder, has halted construction on two planned gigafactories as it moves to producing cheaper battery cells.
This begs the question whether it’s actually worthwhile for Europe to invest billions in an industry that is already dealing with massive global oversupply, and whether European companies can catch up with their Asian counterparts who have been doing the exact same thing for way longer.
While decreasing Europe’s dependencies for the green transition is a reasonable goal, the Northvolt case raises fear that for some industries the race could already be over/that Europe is too late to the party.