Northvolt goes bankrupt: Europe loses ground to China in race for electric batteries

The recent bankruptcy of the Swedish giant Northvolt, which until recently was considered by everyone as the great European hope to lead the transition towards electric batteries, has unleashed a large-scale crisis in the automotive industry on the continent. This blow not only affects the brand itself, but also many companies and projects that depended on its production capacity.

The Swedish company, which had promised to be the cornerstone of European energy independence, accumulated a debt of more than 5.800 billion euros and has filed for Chapter 11 bankruptcy protection in the United States. This move seeks to protect the company as it attempts to reorganize financially, but exposes the problems structural of the battery industry in Europe.

The automotive industry is on the brink of collapse due to the bankruptcy of Northvolt…

Northvolt was not only a key supplier for manufacturers such as Volkswagen, BMW o Porsche, but it also represented the European dream of no longer depending on Asian companies such as CATL or BYD, leaders in battery production. Now, with the bankruptcy of Northvolt, manufacturers such as Porsche face retrasos in powerful and far-reaching projects, such as the new electric Porsche 718, which was scheduled to be launched in mid-2024.

The Volkswagen Group, a major shareholder in Northvolt, finds itself in the awkward position of needing seek alternative supplies quickly while managing the repercussions of this crisis. On the other hand, brands like Audi, which diversified their suppliers with options like LG and CATL, are better positioned to deal with these challenges.

China on the prowl

Northvolt's bankruptcy has opened a window of opportunity for China, through the world battery leader CATL, to strengthen its control of the European market. According to some reports, Northvolt and CATL have been in talks for a possible partnership. Although this measure could mean salvation for Northvolt, it would also mean a symbolic defeat for Europe, which had bet on the Swedish company as its champion in the fight for technological sovereignty.

CATL, which produces the 35% of electric car batteries At a global level, it already has operational plants in Germany and future projects in Hungary. If an alliance or acquisition is finalized, it would not only consolidate itself as the leading supplier in Europe, but it would also undermine the European goal of independence from the Asian giants.

Europe takes action, but are they enough?

In response to the crisis, the European Commission has decided to take action with a investment plan of 4.600 million euros, intended to support battery manufacturing and promote energy independence. Of this amount, 1.000 million will be specifically destined for cells for electric vehicles, while others 1.200 million will be used to boost renewable hydrogen production in Europe.

Additionally, the European Investment Bank has announced a collaboration with the European Commission to mobilize 200 millones de euros more in loans that enable the development of new battery plants and related projects. These measures seek Strengthening the European value chain and offer viable alternatives to car manufacturers.

Impacts on European projects

The crisis is not limited to battery manufacturing; it has also begun to affect other sectors. strategic projects in Europe. For example, Northvolt's departure has led Portuguese energy company Galp to abandon their joint plan to build a Lithium hydroxide plant in Portugal. These types of developments were crucial to ensure a stable supply of essential materials in the manufacture of batteries.

As Europe's reliance on Asian companies grows, several major manufacturers such as Stellantis and Mercedes have begun to halt battery factory projects, putting the future of the European automotive industry at risk. Northvolt's problems have not only affected current plants, but also growth projections, which have stagnated in 176GWh compared to initial plans that promised much more.

The situation becomes even more tense when considering that the market for electric cars in Europe is far behind expectations. This creates a vicious circle: Fewer electric cars mean less demand for batteries, which in turn slows production and the development of new plants.

The current panorama makes it clear that Europe needs to rethink its strategy if it wants to compete with China in the race for batteries. The bankruptcy of Northvolt, far from being an isolated case, is a symptom of the structural and financial challenges that the region faces in its green transition. While the announced investments are a first step, it remains to be seen whether they will be sufficient to reverse the trend and ensure a competitive future for European industry.

Source - Northvolt - Automotive News

Images | Northvolt – Audi, BMW, Volkswagen