The EU’s car wars are far from over.
The threat posed to the European auto sector by the “transition” to electric vehicles (EVs) is hardly new news, nor are the (related) troubles in Northvolt, the Swedish EV battery maker. As I noted in a recent Capital Letter, the company has been cutting jobs and cutting back on expansion plans. Northvolt has attracted vast amounts of financing in the past, and some of its backers appear to be not quite so enthused as they once were. BMW, one of Northvolt’s shareholders, recently pulled $2 billion worth of orders from the company after it failed to meet delivery deadlines.
Volvo Cars (which is majority Chinese-owned these days) has a joint venture to build a plant in Gothenburg jointly with Volvo. But it will not be providing any capital to help Northvolt out of its difficulties. Volvo’s CEO told the Financial Times that he “would love to see Northvolt be successful. . . . But even if Northvolt doesn’t make it as a company, we won’t be affected by that because we are multi-sourced in terms of battery supply.”
I wonder how many of those alternative sources are Chinese-owned.
Volvo had already abandoned its pledge to sell only EVs by 2030. Now the company is saying that it is aiming for 90-100 percent of its sales to be EVs or plug-in hybrids by 2030. It will continue to invest in hybrids owing to the growing demand for such cars — an increasingly familiar story.
Akio Toyoda, Toyota’s former CEO and current chairman, has insisted for a long time that hybrids (a sector of the market in which Toyota has long enjoyed leadership) should have an important part to play in the transformation of the auto sector.
As I noted last year, Toyota claims that:
The amount of raw materials in one long-range battery electric vehicle could instead be used to make 6 plug-in hybrid electric vehicles or 90 hybrid electric vehicles. . . . The overall carbon reduction of those 90 hybrids over their lifetimes is 37 times as much as a single battery electric vehicle.
Those numbers have been backed up by independent sources. Despite that, the EU is including hybrids (which combine both battery power and a traditional internal-combustion engine) in its ban on sales of new combustion-engine-powered cars from 2035, a decision that reveals how far climate policy and rationality are diverging.
To quote myself (yet again, but this time from a Capital Letter published in July 2023):
Climate policy-makers ought to back a technology that reduces emissions and can act as a bridge to consumer acceptance of “full” EVs. That they are not is reminiscent of the opposition by anti-tobacco policy-makers to vaping, an almost infinitely less lethal pastime than smoking. In both cases, the purported policy objective (whether saving lives or saving the planet) comes second to the insistence on absolute purity that is often the hallmark of a certain kind of fanatic.
Speaking of which (via the Financial Times, October 15):
Brussels is sticking to its controversial plans for curbs on combustion engines in the EU from 2035, according to internal documents, despite heavy pressure from the car industry to water down the incoming rules.
This is despite mounting concern that the European auto sector is heading for catastrophe, torn between the conflicting demands of consumers and regulators and threatened (despite higher tariffs) by Chinese competition. With the exception of Renault, every single major European auto manufacturer has come out with profit warnings this year.
The Financial Times quoted Leonore Gewessler, Austria’s (Green) climate and energy minister, climate fundamentalist, and (to repeat myself) no democrat, as one of the defenders of Brussels’ hard line, arguing that the EU could not afford to fall behind on EV technology, as “the future of the automotive industry is electric.” Meanwhile, Gewessler’s own future is looking somewhat uncertain in the aftermath of Austria’s legislative elections, which were a disaster for the Greens. The party’s tally of parliamentary seats fell from 26 to 16, and its share of the vote fell from 13.9 percent to 8.2 percent, a reminder that, as voters come to appreciate the costs of net zero, they are likely to turn sharply against it.
The EU’s car wars are far from over.