It is one of the most promising battery producers in Europe. Alas. For several months, the Swedish Northvolt has been suffering from a series of disappointments. Delivery delays and quality problems led the German car manufacturer BMW to cancel the large order it had placed with the young European manufacturer. Worse, the daily Daily News reported more than 20 serious accidents in five years at the Northvolt plant in northeastern Sweden. Cornered, its CEO, Peter Carlsson, admitted to having “been a bit too aggressive in its expansion plans.”
Shortly before, ACC, the joint venture between Stellantis, TotalEnergies and Mercedes, had decided to put its factory projects in Germany and Italy on hold. The rise of the battery industry on the Old Continent is far from being a smooth ride. But the current difficulties should not prevent European players from capturing part of a market that has until now been ultra-dominated by Asia and China, believes Christophe Pillot, the director of Avicenne Energy, a consulting firm that organizes a major annual gathering dedicated to batteries in Lyon… Provided that Europe continues to support and protect this nascent industry.
L’Express: Northvolt is facing many difficulties. The Swedish battery manufacturer has given up on a new factory, lost an order from BMW… The Franco-German ACC has put its projects in Germany and Italy on hold. How do you explain the difficulties that these representatives of the European battery industry are experiencing?
Christophe Pillot: The difficulties of Northvolt and ACC are, in my opinion, not of the same nature. For the former, the news is indeed bad since the group is unable to produce batteries that correspond to what they promised their customers, hence the termination of the BMW contract which reached nearly 2 billion euros. Another element to take into account in the case of Northvolt is the attractiveness of the United States. With the subsidies promised under the IRA, it becomes more interesting for groups like Northvolt to invest in the United States than in Europe. This explains why another Scandinavian group, Freyr, left the region.
The slowdown at ACC, however, is due to the fact that most battery manufacturers have switched to NMC technology. [nickel, manganèse et cobalt, NDLR] while automotive groups are now demanding LFP batteries [lithium, fer, phosphate, NDLR]Like others, the group is now wondering whether it is able to produce this new technology in its future sites in Germany and Italy.
Chinese manufacturers dominate LFP technology. Can European players scale up their production?
It is not that complicated to produce LPF batteries instead of NMC versions. For European manufacturers, the real problem is the supply, as they have secured all their needs for NMC batteries and need to switch to LFP. Knowing that it seems difficult to locate a supply chain of materials for LFP batteries in Europe, as the components used in such batteries are sold at unbeatable prices.
We have made calculations: the production of cathodes for LFP batteries will remain 30% higher in Europe than in China, even with all the possible advantages. Not only would it be necessary to finance the Capex, i.e. the investment expenditure, but also the Opex, the operating expenditure, of these production sites. It is possible, but the European countries would have to find a common position. However, some countries such as Germany retain strong interests in China.
Is the slowdown in electric car sales likely to complicate the ambitions of European battery manufacturers?
It is true that Northvolt and other manufacturers are suffering from lower sales growth. The time of the first adopters, the famous “early adopters”, is over. Car manufacturers are now required to offer acceptable prices, comparable to thermal models, especially for their private customers. That being said, the electric car remains an extremely buoyant market: we continue to estimate that it will grow by almost 30% per year over the next ten years, which is still enormous. China, which is ten years ahead of Europe, is a good illustration of the fact that it is possible to find ways to encourage the adoption of electric vehicles other than through subsidies, which have decreased in some European countries, such as Germany. This could involve granting special lanes for electric cars, free parking, etc.
Some European manufacturers seem to be struggling to ramp up production. Is this linked to their recent entry into this activity?
Many plants, like ACC, have scrap problems: that was expected. It is very hard to ramp up in the battery industry, and no one is immune. Even the Koreans and Chinese who are setting up in Europe have high scrap rates in their early days. This is an industry where precision must be extreme. Machine adjustments take time. But in the long term, European plants should not exceed scrap rates of around 5%.
Could the refusal, as Northvolt did, to build new factories be a sign that the European battery industry was oversized compared to market needs?
Not at all. There are about 1,700 gigawatt hours of battery production projects across Europe, including initiatives by European manufacturers and foreign players, particularly Asian ones. They will not come to fruition at all: you need the technology, the money and privileged relationships with at least one customer, which will not be the case for all the players involved. We therefore estimate that by 2030, Europe should have a capacity of around 1,000 gigawatt hours, and an actual production that will reach around 700 gigawatt hours. However, this is less than what the market will demand by that deadline.
Is this context likely to increase Europe’s dependence on Asian battery manufacturers, contrary to its ambitions?
European players should still take a significant market share. We can’t imagine being more dependent on Asia than we are today. We depend on the region to supply us with raw materials, for the materials used in batteries and for the machines that we install in European factories! The whole objective of Europe is to be less and less so. And also to create jobs on the territory, hence the fact that governments agree to finance the projects of certain Asian players.
So is Europe still capable of building a battery industry on its territory?
This is in any case what it must seek to do by building capacities across the entire value chain. In the absence of deposits of raw materials, Europe can at least imagine refining them. [activité sur laquelle la Chine reste ultradominante, NDLR]. That being said, we have to face the facts: we are ten years behind China and it is moving faster than us. If we are able to create a value chain in batteries, the battle is not won in advance and it will require real public support. This is important: the electric car remains, in my opinion, the best way to reduce CO2 emissions from automobiles.
Several fatal accidents have recently occurred in the factories of Northvolt and the Korean manufacturer Aricell. Is the increase in production, particularly in Europe, at the expense of employee safety?
The battery industry is dangerous, there is no doubt about it. That is why safety issues must not be neglected, neither in the factories nor for the end consumer. The entire chain is concerned, whether it is the production, transport and storage of batteries, their recycling, etc. There is still work to be done to improve conditions on the sites. In terms of safety, Europe can and must make a difference with other producing countries, such as China.