Are we fooling ourselves by establishing the battery industry in Quebec and Canada? The debate about the environmental damage that the construction of the Northvolt battery factory could cause hides another, much more important issue, namely the competitiveness of the entire battery, solar panel and electric car sector in the face of competition from Chinese companies. Reputable Finland-based company Rystad Energy is very pessimistic about the ability of Western companies to catch up with their Chinese competitors. At best, they could achieve this in about ten years, but on the condition that they invest the equivalent of $700 billion in the sector. At the moment we are far from that. In other words, the financial and commercial risk that Northvolt is asking the Quebec government to take is much higher than it seems.
1) What are the technological advantages of Chinese companies?
Chinese batteries are very efficient. Chinese companies also hold numerous patents relating to electric cars, solar panels and batteries. Therefore, their research teams are ahead of those working in these fields in the West. As if that wasn't enough, Chinese patents in these areas will bring in more and more money and this money will in turn be used to fund research in China.
2) Are we sure we are implementing the right technology?
The answer is probably no. Battery technology is still evolving. The battery factory technology being implemented in Quebec could be outdated before the factory even opens its doors. From a scientific perspective, it is clear that the technology is not yet fully developed.
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3) What is the share of Chinese batteries in global production?
China produces more than 80% of the world's batteries. If all battery factory projects come to fruition, China will still produce almost 70% of all batteries on the planet in 2030. By 2030, these projects will result in global battery overproduction of almost 50%. Worse still, Chinese companies tend to dump, meaning they sell their products below cost to capture markets and eliminate competition.
4) What are the other advantages of China?
China controls most of the production of rare earth elements, which are needed to make advanced electronics such as batteries and electric cars. Given the rapid pace of technological change, no one knows how long these rare earths will be indispensable for battery production. However, Chinese companies have easy access to these rare earths. This does not apply to Quebec-based companies, even if Quebec develops certain rare earth mines. In addition, Northvolt is affiliated with the Volvo company, which was acquired by the Chinese company Geely in 2010. Fortunately, Northvolt also has an alliance with Volkswagen. But in 2023, the market forced Volkswagen to join forces with Chinese automakers.
5) Should the Northvolt project be abandoned?
The project doesn't necessarily have to be abandoned, especially if the factory is part of a larger plan to secure production lines. However, the guarantees required by the Quebec government for this project appear weak compared to the risks involved.