Europe’s main hope of competing globally in the electric vehicle battery market went the way of the dodo this week, so will this galvanise or kill the continent’s industrial ambitions?
Swedish battery-maker Northvolt filed for bankruptcy this week, drawing a line under nearly a decade of trying to make it big in an industry that Europe has struggled to make a dent in.
The firm had attracted big bucks from the likes of BMW, Volkswagen and BlackRock and was regularly touted as Europe’s best chance of competing, particularly against China.
But, according to many in the industry, Northvolt tried to make it too big, too quickly. It was unable to attract enough financing to scale up sufficiently and lost clients and confidence along the way.
It means that 5,000 jobs are now circling the drain and millions of euros in assets need to be sold off. Sweden’s government has pledged to help Northvolt find a buyer.
The firm’s shareholders have indicated that they believe the government and the European Commission stood by and allowed Northvolt to fail, by refusing to step in with financing, the Financial Times reported this week.
Northvolt’s demise poses an interesting question in that regard: could it have been saved if a blank cheque had been on offer? Does money guarantee industrial success?
As autopsies continue to be written, some have suggested that China would never have allowed one of its companies to go bust in this fashion.
Others have suggested that China would not have allowed one of its companies to make the same mistakes that Northvolt made during its difficult learning curve. Financial firepower counts for a lot, but not everything.
That has not stopped the European Commission in recent weeks from moving to make it easier for governments to step in and fund these kinds of endeavours. State aid rules are being relaxed in order to achieve just that.
A so-called ‘battery booster’ will aim to increase the production of battery components, through both direct financing and non-price criteria. It suggests that Europe is not done trying yet.
Northvolt’s interim chairman has urged Europe to use what his firm has built over the last decade as a foundation for further steps forward in the industry. It seems likely that the battery baby will not bE thrown out with the bathwater.
But time is against Europe’s hopes of competing. Northvolt’s domestic rivals are years behind where the firm had got to before everything went south, meaning there is a massive gap to bridge.
That increases the chances that the same mistakes or new ones will be made in order to try and scale up the industry. Lessons will be learned but new ones will have to be sat through as well.
And then there is of course China, which is not going to wait for Europe to get its house in order. Industry leader CATL is planning to expand production in a handful of European countries.
The automotive industry wants to buy European if possible but carmakers are not going to risk their own financial ruin by turning their backs on Chinese batteries. Especially if there is no feasible alternative.
It would be easy to throw in the towel to Chinese batteries but a short-sighted and foolish decision. The last couple of years have shown how dangerous it is to become reliant on one supplier for critical materials.
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