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  HOME | Business & Economy (Click here for more)

Battle to Power Electric Vehicles Reaches Sweden

VASTERAS, Sweden – Machines are strewn about the floor. Cranes heave building material through the factory hall. In this patch of Swedish forest, preparations are afoot for the battle between Europe and China over control of the technology that powers electric cars.

Peter Carlsson, a tall, blond Swede sporting a stubble, once managed Tesla Inc.’s supply chain. Then he founded Northvolt AB, which aims to become the prime purveyor of batteries to Europe’s makers of electric and hybrid cars. Pointing at the chaotic site, he insists the first batch of test battery cells will roll off the factory floor in the next 10 weeks.

“The Chinese can build an entire factory in 10 weeks,” he said. “We’ll make it.”

Northvolt is launching into a market that has been locked up for years by such Asian technology giants as South Korea’s LG Chem Ltd., Samsung Electronics Co. and SK Innovation Co. But Carlsson – backed by investors that include Goldman Sachs Group Inc., the European Investment Bank, Volkswagen AG, BMW AG and power group Vattenfall AB – is betting that Europe can catch up.

His ambition is to create a European supply chain that links electric-car manufacturers with battery makers, all powered locally by solar and wind plants and using European workers and know-how. The hope is that Europe can retain its expertise as car production shifts from mechanical engineering – where the region has excelled – to batteries and software.

“We need to act with a sense of urgency,” Carlsson said. “If Europe can build its own ecosystem that supports universities, research and development, and production, it will create jobs versus just having a feeder system of Asian suppliers.”

His bet is based on an expected demand boom as auto makers invest billions of dollars to take electric vehicles mainstream. Volkswagen alone expects to build at least two million electric cars a year by 2025, many of those in Europe.

Non-European players, such as Contemporary Amperex Technology Ltd., known as CATL and backed by the Chinese state, are muscling in. CATL plans to construct a $2 billion battery plant in Thuringia, in eastern Germany. LG Chem is building a second plant in Poland, while rival SK Innovation has broken ground on its second Hungarian plant.

But European auto makers and politicians are eager to develop a regional supply chain mirroring the one that exists for conventional automobiles.

This is something of a U-turn for car companies that long considered batteries a commodity not worth producing in Europe. Daimler AG ended battery cell production in 2015, saying it was too costly. But when these manufacturers began ramping up their electric-vehicle plans in recent years, they struggled to secure sufficient raw materials and battery capacity, and realized they had to invest in battery production.

In June, Volkswagen agreed to invest EUR900 million ($994 million) in Northvolt, becoming its biggest shareholder. As part of the deal, Volkswagen and Northvolt formed a joint venture to build a battery plant in Salzgitter, Germany, where Volkswagen has its second-largest engine factory.

Separately, nine European Union member states agreed this month to form a consortium of public authorities to support the nascent battery industry. Germany alone is providing EUR1 billion in public money for a European project that includes PSA Groupe SA, the maker of Peugeot, Citroën and Opel cars; and Saft Groupe SA, a French battery maker.

“In the future Germany and Europe must develop and produce innovative, environmentally friendly and competitive battery cells on their own,” German Economics Minister Peter Altmaier said when announcing the new EU battery initiative.

The shift to electric vehicles could have a huge impact on an industry that employed some 13.8 million workers in Europe last year. The German government’s Institute for Employment Research estimates it could destroy 13% of the country’s automotive jobs by 2035, a trend that would likely be replicated across Europe.

Still, the cost of investing in battery development and production from the ground up is proving too steep for even large suppliers. Earlier this year, Robert Bosch GmbH, the world’s leader in diesel-engine components, said it wouldn’t step into the business, citing costs and risks.

That leaves Northvolt as Europe’s biggest bet so far to protect its automotive jobs and profits. The factory that Northvolt is building in the Swedish hinterlands is the first automotive battery-cell production facility in Europe that is comparable with the massive Tesla factory in the U.S. As Elon Musk’s right-hand man, Carlsson is largely credited with recognizing the need for Tesla’s so-called Gigafactory 1.

Northvolt’s Vasteras plant is mainly a research and design lab, the smaller of two facilities that the company is building. A bigger factory, set to start production in 2023, would produce batteries with 32 gigawatt hours of capacity a year, enough for about 300,000 electric cars. It will be located far to the north in Skellefteå, near the Gulf of Bothnia, which separates Sweden and Finland.

Carlsson believes Europe has key advantages: its know-how about automation and its growing supply of low-cost energy from windmills, solar power and Scandinavia’s hydroelectric power stations.

“There is an opportunity for Europe if can build to scale and put the plant in a place where you have the lowest energy costs in the world. Then you can really compete with the Chinese,” Carlsson said.


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