It doesn’t happen often that a start-up receives so much support and then falls as hard as the Swedish battery builder Northvolt. Europe’s ‘own’ gigafactoryintended as an example of the strategic autonomy so desperately sought, is almost bankrupt. That is a disappointment, but no reason to give up the pursuit of a strong European green technology industry.
Afterwards it is often easy to point out where things went wrong. Northvolt has grown too fast. The financiers remained lenient even though it was already clear that production had to be scaled back to improve the manufacturing process. And perhaps investors thought too rosy about Northvolt, because there was also a lot of support from governments.
Sweden, Germany and the European Union, among others, looked to Northvolt for an answer to Chinese dominance in battery technology. Chinese entrepreneurs have been investing in the chain of raw material extraction, refining, batteries and electric cars for decades. Often, but not always, with financial support from the government. The result is global Chinese dominance, while relations with Western countries are becoming more difficult.
Europe’s backlog is so great that it seems difficult to catch up. The Chinese battery manufacturer CATL alone has a global market share of 38 percent. Announced last month CATL its third European factory, in Zaragoza, Spain. Also significant: the factory is expected to be operational within two years.
Northvolt was the European start-up that took on this Asian violence. With its own technology, a factory in northern Sweden that would run entirely on clean energy from hydropower and wind and large contracts with European car manufacturers, so that they too could reduce their dependence on China.
The idea was that this adventure could only succeed if Northvolt grew to ‘giga capacity’ as quickly as possible. BMW placed orders worth 2 billion euros, Volkswagen became a major shareholder and the European Investment Bank supported the plan with a billion euros.
But Northvolt was unable to deliver the required quality on such a large scale. BMW withdrew in the summer conclusions and moved its order to South Korea’s Samsung. Then the decline started. Volkswagen, which is also struggling itself, has now made most of its investment written off. Goldman Sachs also deleted $900 million from its books.
It may sound realistic to conclude that there is no longer room for a successful European competitor. That this form of industrial policy has no chance and that Europe would be better off encouraging more Chinese battery manufacturers to settle here. And that European companies must limit themselves to supplying parts.
That would be premature. It is an uncomfortable truth that the West has no knowledge advantage over Asia in this area and the roles have been reversed this time. If the race to catch up is also difficult, it is also frustrating. But Europe cannot afford fatalism. Lessons can be learned from Northvolt’s fortunes and then simply starting over.
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This Swedish town seemed to grow into the battery capital of Europe. Until things went wrong