The problems of the automotive industry are getting worse, and the announcement of bankruptcy under Chapter 11 by Northvolt AB is the biggest failure to hit the European automotive sector so far. However, the effects of the Swedish battery manufacturer’s insolvency are spreading throughout the region.
According to a Bloomberg News analysis, 12 of 16 planned European battery factories have been delayed or canceled.
Meanwhile, Asian companies are successfully investing in such projects in Europe. 10th of 13 projects in the region implemented by Asian manufacturerssuch as China’s Contemporary Amperex Technology and South Korea’s Samsung SDI, are on track to launch.
This suggests that Asian companies will have an increasing influence on the sector, putting Western carmakers at a competitive disadvantage in the event of a supply crisis or political conflict.
EV battery projects supported by European companies / Bloomberg
China’s gigantic advantage
The demand for electric vehicles is decreasing, which is severely felt by Volkswagen and BMW, the main supporters of the Swedish startup. Moreover, local producers have problems mastering the technology.
Meanwhile, companies such as CATL and BYD have a long-standing technological advantage and sell batteries at unbeatable priceswhile the Chinese companies’ European rivals struggle to ramp up production and sluggish sales of electric vehicles in the region have prompted their automotive customers to scrap electrification plans and cancel battery orders.
“Failure to establish domestic battery production capacity threatens the very existence of the automotive industry in Europe” Andy Palmer, former CEO of Aston Martin Global Lagonda Holdings Plc, told Bloomberg.
China supplies about 80 percent. world’s lithium-ion batteries and is home to 6 of the 10 largest battery producers to electric vehicles in the world, according to BloombergNEF.
China’s cell production capacity is already well above global demand for electric vehicleswhich caused battery prices to drop dramatically, raising the bar for new market participants.
European companies are dropping like flies
Mercedes-Benz and Stellantis — which is struggling with falling sales — has halted work on two battery plants in Germany and Italy. Volkswagenwhich is pushing for unprecedented cost cuts in Germany, signaled that its European cell factories may need more time to reach full capacity. British battery startup Britishvolt Ltd. collapsed last yearbefore successfully opening its planned £3.8 billion ($4.8 billion) location in Blyth.
The next victim is Northvolt, which was considered Europe’s best hope for a local battery production championafter the company racked up about $55 billion in cell orders. But the company founded by former Tesla executives, which had ambitious plans for factories in Sweden, Germany and Canada, has struggled to increase production while keeping costs low. This culminated in the layoff of a fifth of its employees, the closure of two cathode material production plants in Sweden and, after accumulating more than $5.8 billion in debt, it filed for bankruptcy protection in the US.
Plans to build a $36 billion EV battery factory in Europe face setbacks / Bloomberg
Europe’s late reaction
Europe is losing partly because its car manufacturers they are slowly switching to battery technology. While Europe dragged its feet, China rushed ahead, investing massively in its own domestic electric vehicle industry. Meanwhile, European producers VW, BMW and Mercedes wanted to sell their profitable, fuel-hungry cars for as long as possible. WhereasBYD, which started by producing batteries for mobile phones, introduced its first electric car in 2008.
This meant that by the time European carmakers bet everything on electric cars in 2021, CATL had already become the largest battery manufacturer in the world, with BYD a major driving force in the development of electric vehicles and cells.
Total lithium-ion battery cell production capacity in Europe / Bloomberg
European efforts to create local battery leaders have gained momentum in recent years. However, another problem arose –egion is struggling with a shortage of skilled technicians and high energy costssaid Liana Cipcigan, professor at Cardiff University. Meanwhile, establishing efficient factories turned out to be more complicated than expected. Replicating high-performance production requires tuning over a thousand processes, which makesdirect replication of Chinese or Korean plants is virtually impossible.
