The European Dream of Battery Independence Becomes a Nightmare

The ambitions of European battery manufacturers are waning, and numerous companies are turning to collaboration with Asian partners, after the bankruptcy of Northvolt cast a shadow over the European Union’s efforts to build its own, independent battery industry.

Swedish Northvolt, once one of the most promising European startups in the sector, attracted over 15 billion dollars in investments, including government funds, before declaring bankruptcy in early March, FT reported.

This development has served as a warning to other companies that the EU sees as key to reducing dependence on Chinese batteries, at a time when the continent is trying to catch up with the growing electric vehicle market, although it still significantly lags behind Chinese and Korean competitors.

French ACC, German PowerCo, and another French company, Verkor, are among those striving to develop the production of powerful batteries and thus compete with market leaders like China’s CATL and BYD.

However, European initiatives are facing unfavorable economic conditions and increasing skepticism from investors.

– Investors are asking companies to prove they are not the next Northvolt – stated an industry advisor at the Batteries Event conference in Dunkirk.

China Strengthens Its Position as a Global Leader

By 2030, the European Union aims to produce 90 percent of the required batteries within its own borders. However, European capacities are projected to reach 720 gigawatt-hours (GWh) by then, which is an improvement from 150 gigawatt-hours last year, but still far below China’s 4,370 gigawatt-hours, according to McKinsey Battery Insights.

Despite the presence of some Asian manufacturers in Europe, many officials and leaders emphasize the importance of local contributions.

– We need this industry in Europe, not to ensure 100 percent, but to ensure a significant part. This is a key element of European sovereignty – says Yann Vincent, CEO of ACC.

Nevertheless, European automotive giants, such as Stellantis and Renault, are already using batteries produced in Asia, while Chinese companies are increasingly solidifying their global position. The recent breakthrough by CATL and BYD with the invention of batteries that charge in just five minutes further increases pressure on European manufacturers.

ACC is currently building 16 gigawatt-hours of production capacity in Douvrin, northern France, with plans for the first phase to be completed by 2026. However, they are facing challenges similar to those Northvolt encountered: high costs, low yields, and a large share of waste.

– We are in a period until mid-2026 where we will take all the hits, but we will not yet reach full throughput – says Vincent, highlighting the need to bridge the so-called ‘valley of death’.

To reduce costs, ACC has abandoned plans to build factories in Italy and Germany. Instead, they are in negotiations with a Chinese partner who could help optimize production.

Northvolt, in trying to cover the entire value chain – including recycling and cathode production – may have overextended its business, which others are now deciding to avoid.

– Northvolt had the great luxury of being able to quickly raise a lot of money. That may have caused their downfall – said a banker to FT.

Nothing Without Public Money

Volkswagen’s PowerCo has also revised its plans. Instead of two lines in Salzgitter, it will build only one. On the other hand, Verkor, supported by Renault, plans a more moderate growth pace and focus on a single customer.

– We need to be modest in setting up the first part of the project, even if it sounds good on paper to have more different workflows – said CEO Benoit Lemaignan, adding that Verkor will produce batteries for specific sports and delivery models of Renault.

Kevin Brundish from Dutch LionVolt warns of the financial demands that Northvolt overlooked, and proposes a different approach – smaller, technologically advanced projects. Their technology, taken from the semiconductor industry, allows for batteries that charge twice as fast and last longer. LionVolt has so far raised 30 million euros for production capacities in Eindhoven and Scotland.

Nard Sintenie from the Innovation Industries fund, which invested in LionVolt, stated that Northvolt offers only ‘me too‘ technology, while their fund prioritizes ‘revolutionary’ solutions.

Despite everything, experts warn that Europe cannot reach its goals without greater public investments, such as those enjoyed by Chinese manufacturers.

ACC, Verkor, and Taiwanese ProLogium have received a total of over three billion euros in public funds from France, and the Dunkirk region – known as the ‘battery valley’ – also benefits from access to nuclear energy.

However, Dunkirk’s mayor, Patrice Vergriete, warns that such a level of support may not be sustainable.

– France has been following these industries, but today we have less funding and we are turning to the European Commission with the question… isn’t this reindustrialization project a European project? – said Vergriete.

The European Commission states that ‘the competitiveness of our industry is priority number one’, noting that the Green Industrial Plan has secured 100 billion euros to promote clean production. Vincent and Lemaignan urge the EU to target funding towards companies that can realistically produce in large quantities. One banker expects ‘consolidation’ in the industry.

– Even with strong shareholders, they are under very strong pressure. We are turning to the European Commission because we need help to cross this valley of death – concludes Vincent.