While we have gone on record suggesting that EVs will effectively gut the established order of car manufacturers, that does not mean that the existing leaders should simply lay down and die.
What we mean is that given the low number of moving parts in an EV, the process of making them has to be simpler, cheaper, and more streamlined and will not suit distributed manufacture in quite the way a conventional car is built using multiple factories and just in time planning.
That means a huge reduction in factory numbers, and a consequent reduction in the parts businesses which make up all of the car maker’s dependent suppliers. Any car company that is willing to reduce in size quite that dramatically, has to be cutthroat and follow where this market leads. Freshly funded Chinese companies carry less baggage than BMW and VW and may prove to be better at it.
But this week it is those two companies VW and BMW, who make up key elements in a $1 billion effort to guarantee that some manufacturing of Lithium Ion car batteries will be located in Europe. Although it may not be sufficient, it is a start.
Volkswagen with Goldman Sachs have led a $1 billion equity increase at Northvolt, with BMW Group supporting along with AMF, Folksam Group and the IMAS Foundation.
There is also debt financing from the European Investment Bank in an attempt to create a 16 GWh annual manufacturing capacity at what it is calling a Gigafactory in north Sweden, at Skellefteå, with construction beginning in August.
It says it can make orders worth $13 billion in the run up to 2030 and has sold all of that production already – presumably to VW and BMW, among others. That’s what we call being “safe” with your investments, not cutthroat.
A joint venture between the Volkswagen Group and Northvolt will be set up to establish a second 16 GWh battery cell gigafactory in Lower Saxony, Germany. And that figure, $1 billion, comes up again, as the total amount that Volkswagen is investing in joint battery activities with Northvolt across the JV and this equity investment in Northvolt, so we presume about half and half.
“Today is not only a great milestone for Northvolt, it also marks a key moment for Europe that clearly shows that we are ready to compete in the coming wave of electrification, and that we will do so using battery cells which carry the lowest CO2 footprint possible,” said Peter Carlsson, co-founder and CEO of Northvolt.
Well given that the Tesla Gigafactory is already at 35 gigawatt-hours per year and a second one is about to open, that just about puts VW and Northvolt at 25% of the Tesla product, which gives an idea of their level of commitment to EV, i.e. nothing like enough. To us this is VW planning to be smaller than Tesla – think about it, that can’t be right.