northvolt and vw woes continue in europe

​Northvolt has recently announced significant changes to its production strategy, which will impact key sites. As part of the new strategy, cathode material production at the Northvolt Ett plant in Skellefteå, Sweden, will be stopped although plans for cell production at the facility will proceed as scheduled.

In another move, the Northvolt Fem program in Borlänge, Sweden, which was intended to be a new production site for cathode materials, will also be discontinued. The Borlänge site, which was only acquired in 2022, is now set to be sold, marking a significant shift in the company's plans for its Swedish operations.

Meanwhile, Northvolt's largest battery system factory in Europe, Northvolt Dwa in Gdansk, Poland, remains a critical part of the company’s strategy. However, the company is actively seeking partners or investors to help finance its operations at the Polish site, indicating potential challenges in maintaining self-sufficient operations.

Adding to this, Volkswagen (VW), one of the largest car manufacturers in the world, recently revealed its decision to close a plant in Germany. The closure appears linked to decreased demand for combustion engine vehicles, ongoing cost pressures, and the global shift toward electric cars. These closures reflect mounting difficulties for European automakers as they navigate the transition to EVs, facing both technological challenges and stiff competition from foreign markets, particularly China.

According to Bloomberg news, nearly a third of large auto plants in Europe made fewer than half the vehicles they have the capacity to make. Car sales are nearly a fifth below pre-pandemic levels, and demand for EVs is lower than expected. That's leaving factories half-empty and looming structural problems for Europe where the auto industry accounts for over 7% of the EU’s GDP and more than 13 million jobs.

Meanwhile, Chinese automaker BYD (Build Your Dreams) is rapidly growing, selling over 3 million cars annually, compared to Tesla’s 1.8 million sales. BYD's success underscores China’s ascendance as the new epicentre of global car manufacturing, particularly in the EV sector. This increase is encouraged by strong government support, access to critical raw materials, and an extensive domestic supply chain that enables the production of affordable EVs at scale.

Chinese carmakers are rapidly growing their global footprints, with BYD planning plants in Thailand and Hungary, among other countries. The company is also buying its German distributor Hedin Electric, as it moves to scale up in Europe.

By 2030, Chinese carmakers could see their share of the global EV market double to a third, UBS has forecast, with European firms suffering the biggest loss of market share as a result.

The shift toward China as the world’s leading car manufacturing hub has profound implications for the global supply chain, especially for companies in the critical raw materials sector.
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With Northvolt and VW signalling supply issues and a retraction of Europe’s manufacturing base, critical raw materials companies may see greater opportunities in Asia. However, the geopolitical risks and supply chain vulnerabilities remain significant.

To thrive companies must navigate a rapidly shifting landscape, where China’s dominance in EV production is setting the pace for the global market. 

We continue to see strong investment in Europe in new battery technologies, substitution processing and materials and recycling technologies.