Updated Dec. 17, 2024 at 5:20 p.m.
HAMBURG — Anyone curious about the state of European pursuits in the electric car battery sector need only catch some recent news reports coming from Germany. In June, top national broadcaster Tagesschau reported on its website: “ACC plant in Kaiserslautern: construction halted for the battery factory.” In September, a regional newspaper headline from another German city: “Cutbacks in battery cell factory in Salzgitter.” A month later, regional broadcaster Saarländischer Rundfunk covered the exit of Chinese battery manufacturer SVolt from Europe.
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But none of those stories are as alarming as the news that broke last week: Europe’s biggest hope in the industry, Swedish battery maker Northvolt, filed for Chapter 11 bankruptcy protection in the U.S. The filing temporarily shields Northvolt from legal claims by creditors, giving the company breathing room to restructure its debts, plan for growth, and find new sources of financing.
Whether the company can bounce back is still unclear. There’s been growing pressure from investors demanding results, but Northvolt hasn’t managed to ramp up production as promised. “In hindsight,” cofounder Peter Carlsson admitted, “we were too ambitious with our timeline.
“The European dream is over”
For economics professor Serden Özcan, Northvolt’s troubles are just the tip of the iceberg for Europe’s struggling battery sector. “The European dream is over,” said Özcan, who teaches at the WHU-Otto Beisheim School of Management.
But exactly what dream is he talking about? Back in January 2022, the environmental group Transport & Environment projected that by 2027, the EU could break free from its dependency on Chinese electric car batteries. Today, such optimism has all but vanished. “Too much has gone wrong for that to happen,” Özcan explains.
He believes Europe once had a shot at competing with China but squandered its opportunity. “Five years ago, Europe could have made it.”
Wolfgang Bernhart, a partner at the management consultancy Roland Berger blames a lack of clear public policy. “The future of e-mobility in Europe is uncertain,” he says, noting that some politicians are questioning the EU’s planned 2035 phase-out of combustion engines. “For investors, that’s a risk they just can’t quantify.”
Absolute market leader
China’s dominance in the battery market is staggering. According to SNE Research, more than half of all electric car batteries built in the world come from Chinese companies, with CATL alone accounting for over one-third of global production. And it’s not just about factories in China anymore; Chinese firms have set up shop in Europe too.
Last year, CATL inaugurated its first non-Chinese plant in Arnstadt, Germany. The facility churns out enough batteries annually to power 200,000 to 350,000 electric cars, depending on battery size — a total capacity of 14 gigawatt-hours. Initially, CATL had bigger plans, eyeing 100 gigawatt-hours of production in Germany. Those ambitions were later scaled back, with the company opting to build a plant in Hungary instead.
Meanwhile, Germany’s local efforts look meager in comparison. UniverCell produces just 1.5 gigawatt-hours annually in Flintbek, near Kiel, and Swiss company Leclanché has a facility in Willstätt, near Offenburg, with a capacity of one gigawatt-hour.
Risks of overreach
Across the EU, the outlook remains grim. Europe currently has only eight operational cell factories, with another 14 under construction, some in Germany. Volkswagen’s subsidiary PowerCo is set to open a plant in Salzgitter next year, but its planned capacity has been halved to 20 gigawatt-hours. Northvolt is building a factory in Heide, Schleswig-Holstein, but its future is now murky.
They wanted to do everything at once — not just car batteries, but airplane batteries too.
In a press release, Northvolt stated that construction on the Heide site is ongoing. The factory, operated by Northvolt Germany — a separate entity from the parent company — hasn’t filed for creditor protection and aims to start production in late 2027. Still, Özcan is skeptical. “The Swedish parent company hasn’t delivered good batteries in five years, despite receiving €15 billion in subsidies,” he points out. “Why should things suddenly change now?”
He criticizes Northvolt’s overreach: “They wanted to do everything at once — not just car batteries, but airplane batteries too. They planned factories worldwide, launched joint ventures with automakers, and even ventured into recycling. It was all too much, too fast.” Given the slump in Europe’s e-car market, where buyer interest has waned and investors are increasingly cautious, Özcan doubts the plant will ever be completed.
The professor says the company wanted too much at once. Northvolt planned factories all over the world, founded one joint venture after another with car manufacturers. “If you haven’t produced a single battery yet,” he says, “maybe you shouldn’t be planning recycling factories at the same time.”
Cautious optimism
Not everyone shares Özcan’s grim outlook. Germany’s Economy Minister Robert Habeck remains “cautiously optimistic,” predicting that Northvolt’s restructuring could succeed. Local officials in Dithmarschen, where the Heide plant is being built, also expressed confidence in its completion, according to Capital magazine.
Even so, Bernhart warns that even a completed factory would only be a minor win for Europe’s trailing battery sector.
“China’s lead in lithium-ion batteries is too great to catch up,” he says.
However, he sees potential in emerging technologies. Researchers worldwide — and in Germany at institutions like the Helmholtz Center and the Fraunhofer Institute — are working on alternatives, such as sodium-ion and lithium-sulfur batteries.
“The Chinese are ahead in these areas too, especially with sodium-ion batteries,” Bernhart admits. “But the train hasn’t fully left the station yet.”
Unfortunately, Germany’s recent cuts to battery research funding make it harder for the country to compete. As Bernhart puts it, “It’s a shame the government chose this moment to tighten the purse strings.”
Originally published Dec. 12, 2024, this article was updated Dec. 17, 2024 with additional news about Trump and enriched media.
