By South China Morning Post | Created at 2024-11-29 12:31:41 | Updated at 2024-11-29 14:47:11
2 hours ago
While many businesses worldwide are wringing their hands about Donald Trump’s plans for a “beautiful” tariff war – targeting Canada, Mexico and China on his first day back in the Oval Office – my attention was focused on the sub-Arctic town of Skelleftea in Sweden and the collapse of Northvolt, Europe’s electric-vehicle battery champion.
Richard Milne at the Financial Times called Northvolt’s resort to Chapter 11 bankruptcy protection, with US$5.8 billion of debts and just US$30 million cash in its coffers, a “Nordic noir thriller”. The collapse is nothing less than a dagger thrust into the heart of Europe’s future as a global automotive industry leader. Volkswagen has written down most of its 21 per cent stake in the venture. Goldman Sachs is writing off US$896 million in the venture. European taxpayers will have to provide $313 million because of EU guarantees.
The collapse threatens the European Union’s plan for its registered vehicles to reach net zero emissions by 2035 and to address the challenge from China as a world leader across the spectrum of clean energy industries.
The most direct impact of the Northvolt collapse will be on Europe’s critically important automotive sector, which has been a symbol of the continent’s economic virility for half a century. The sector accounts for 13.8 million jobs – over 6 per cent of Europe’s total employment. In Germany, Sweden and four other EU economies it accounts for over 10 per cent of manufacturing jobs.
Companies like Volkswagen, BMW, Mercedes and Porsche may have been global giants as car manufacturers for most of our lifetimes but their tardiness in addressing the shift to EVs has jeopardised not only their futures but those of the smaller manufacturing businesses that rely on them. Northvolt’s bankruptcy leaves them frantically searching for new EV battery suppliers, most of which are in Asia.
The Chinese EV challenge has been front of mind in Europe for some time. As worldwide EV sales rose to 14 million in 2023 – about 18 per cent of global car sales and up from a minuscule 2 per cent in 2018 – China’s share of the EU market for EVs leapt from less than 5 per cent in 2020 to 29.3 per cent. While many of those cars were made by European companies operating in China, the blow to pride and self-confidence has been palpable.
