2024-11-22 17:56:00
It’s a bolt from the blue for the European automotive industry: After months of financial difficulties, the Swedish electric battery manufacturer Northvolt has asked to be placed under American bankruptcy protection. Its co-founder and CEO, Peter Carlsson, formerly of Tesla, the American electric car giant, resigned immediately.
The company had already announced in September the elimination of more than 1,600 positions out of 6,500. While Swedish Prime Minister Ulf Kristersson has ruled out the option of a public bailout, the group has been seeking investors for weeks to refinance in the short term. . A placement under the US bankruptcy regime could give it access to the funds. It plans a renovation by the end of the first quarter of 2025, it said in a press release.
The first gigafactory in Europe
Northvolt, however, appeared to have a future as a European industrial giant, with the first gigafactory, a factory dedicated to large-scale battery production, established in Europe. Its batteries, produced exclusively using renewable energy, were supposed to supply European car manufacturers, to face Asian and American competition less inclined to make their production more eco-friendly.
The group has had a prosperous start: since its creation in 2016 it has raised 14 billion euros in funds. Numerous prestigious manufacturers (Volkswagen, BMW, Volvo, Scania, etc.) are shareholders, first and foremost Volkswagen, with 21% of the shares, and/or have contributed to filling its order book, for a total of 52 billion euros until today .this day.
In particular, he managed to attract a significant amount of public money, including a loan of 350 million euros from the European Investment Bank (EIB) and support from Germany amounting to 900 million euros in 2024. for the construction of a factory on its territory – the European Commission has agreed to waive competition rules for this purpose.
Delays in production
But starting from 2023, the manufacturer’s difficulties in achieving its goals emerged. Citing production delays, BMW in June canceled an order worth nearly 2 billion euros placed in 2020. Northvolt, which had said it aimed to reach a production capacity of 60 GWh per year – enough to equip one million vehicles – currently does not reach the equivalent of one GWh (i.e. the cells needed to assemble 17,000 vehicles – for comparison, Tesla produces 1.8 million copies per year).
“The goal was probably too ambitious, underlines Raphaël Curtz, energy expert at the consultancy firm Sia Partners. There were difficulties growing up. The industrial production of so many battery cells is operationally and technically complex, and operating costs are high. »
Complex and expensive production
“The production of battery cells and modules is highly complex from an industrial point of view: it combines chemical, mechanical, electrical, etc. treatment processes. explains Matthieu Hubert, general secretary of the battery company ACC. It requires, for example, coating at high speed – 80 meters per minute – very thin layers of copper and aluminum that are just a few microns… the thickness of cigarette paper! These “strips” will become electrodes. At the slightest hitch they can tear. And it’s just one stepmanufacturing, among many others…”
Any delay in production that leads to a decrease in revenue and incurring very high fixed costs can therefore prove difficult: “a production block of a gigafactory requires investments of around one billion euros”explains Matthieu Hubert, and Northvolt had planned to develop several of them.
Ambitions revised downwards
The group has in fact had to review its ambitions downwards: the group, which planned to position itself along the entire battery production chain, from the manufacturing of components to recycling, declared in October 2024 that it would renounce expanding its activities beyond cell production. The previous month it had announced the abandonment of its second factory project in Sweden, while the others, in Germany, Poland, the United States and Canada, were delayed or suspended.
As the transition to electric begins, marked by the EU’s decision in March 2023 to end sales of new combustion-engined cars by 2035, the main issues revolve around the development of a European battery sector: climate protection, but also sovereignty towards the main producers: China, Korea, Japan…
Tough competition from Asian companies
OR “Europe will hardly be able to catch up in the short or medium term, because China invests more and has fewer constraints, especially environmental ones” analyzes Raphaël Curtz. Chinese companies, including the giants BYD and CATL, have concentrated three-quarters of global production capacity in 2023, far ahead of Europe, with 7% of the total.
“The battery design and manufacturing sector in Europe and France, which is very strategic, is only a few years old. Four years for ACC, and we are pioneers… On the other hand, foreign competitors – all Asian – emerged at least ten years ago, unmask Matthieu Hubert. They had more time to master industrial processes and benefited from ultra-favorable development conditions, in particular massive subsidies.” – a European Commission investigation recently highlighted this last point. Their production costs are much lower than in the EU.
Another potential difficulty for European manufacturers: the slowdown of the electric mobility market, especially due to the high price of these vehicles – at least 20 to 30% more expensive than equivalent combustion models, according to the ACC general secretary. Little expected by the actors, it “will likely have an impact on the activity of European gigafactories”concludes Raphaël Curtz, while these, active or planned, now number in the dozens.
#Northvolt #pioneer #Europe #batteries #danger
What are the key challenges Northvolt faced in scaling up their battery production operations?
Interview Between Time.news Editor and Raphaël Curtz, Energy Expert at Sia Partners
Editor: Good afternoon, Raphaël. Thank you for joining us today to discuss the recent developments regarding Northvolt. It’s quite a turning point for a company that aimed to be a leader in battery manufacturing in Europe. Can you give us your perspective on why Northvolt found itself in such a difficult financial situation?
Raphaël Curtz: Good afternoon! It’s my pleasure to be here. Northvolt’s challenges stem from a combination of overly ambitious goals and significant operational complexities in battery production. While their intention to produce batteries solely with renewable energy was commendable, the reality of scaling up operations proved to be much tougher than expected.
Editor: You mentioned ambitious goals. Can you elaborate on what Northvolt was aiming to achieve, and where things began to go wrong?
Raphaël Curtz: Certainly. Northvolt aimed to achieve a production capacity of 60 GWh per year—enough to power roughly one million vehicles annually. However, delays in production started to surface, and they encountered setbacks, like the cancellation of a significant order from BMW worth nearly €2 billion. By 2023, they were struggling to produce even 1 GWh, showing a vast gap between intention and reality.
Editor: That’s a stark contrast. What do you think were the primary operational challenges they faced?
Raphaël Curtz: The production of battery cells is extraordinarily complex. It involves intricate processes that blend chemistry, mechanics, and electronics. Even a small hiccup—like the tearing of a very thin layer of copper or aluminum—can halt production lines running at high speed. This complexity, coupled with high fixed costs, creates a challenging financial environment.
Editor: Given these operational difficulties, it’s no surprise that they’ve had to revise their ambitions downwards. What does this mean for the broader European battery sector, especially amidst the EU’s push for greener solutions?
Raphaël Curtz: Northvolt’s situation highlights the fragility of the European battery supply chain. As the EU aims to transition to electric vehicles and phase out combustion engines by 2035, there’s a pressing need for Europe to establish a reliable and efficient battery sector. This requires not just production capabilities but also investment in innovation and infrastructure.
Editor: It’s critical indeed. How significant do you think Northvolt’s bankruptcy protection filing will be for other manufacturers in Europe?
Raphaël Curtz: It could serve as a wake-up call. Other manufacturers may need to reevaluate their business strategies and production timelines. It’s crucial that they learn from Northvolt’s experience—balancing ambition with feasibility is key. Additionally, access to funding and strategic partnerships will play a crucial role in the resilience of the European battery sector.
Editor: And what about the public reaction to this news? With Swedish Prime Minister Ulf Kristersson ruling out a public bailout, what implications does that have for government support in the industry?
Raphaël Curtz: It suggests a challenging environment for start-ups and manufacturers in the green technology space. Without the safety net of government bailouts, companies must prove their viability and stability before accessing public funds. It might encourage them to adopt more conservative business models, focusing on gradual growth rather than aggressive expansion.
Editor: As we watch Northvolt navigate these turbulent waters, what key takeaway would you recommend for potential investors in the electric battery market?
Raphaël Curtz: Investors need to conduct thorough due diligence on production capabilities and technology readiness. The electric vehicle battery market holds great promise, but it’s essential to recognize and account for the operational challenges inherent in this sector. Sustainable investments will flourish in firms that are transparent about their production capabilities and realistic in their growth forecasts.
Editor: Thank you, Raphaël, for your insightful perspectives on Northvolt’s current situation and its implications for the industry. It certainly underscores the complexities of transitioning to an electric future!
Raphaël Curtz: Thank you for having me! It’s an evolving landscape, and I look forward to seeing how it unfolds.