China's EV battery titan is coming for Europe

• Northvolt filed for bankruptcy last month after burning through $15 billion.
• The Swedish EV battery maker was considered Europe's best hope for a homegrown battery manufacturer.
• Europe's battery industry is likely to be dominated by Chinese companies, with CATL eyeing expansion.

Europe's best hope for an EV battery manufacturer reached the end of the road last month.

Northvolt, the EV battery maker founded by two former Tesla executives and backed by the likes of Volkswagen and Goldman Sachs, filed for bankruptcy after running out of cash.

The startup's demise after burning through $15 billion poses big questions for European policymakers — and leaves the field open for a Chinese battery titan to continue its global expansion.

CATL, the world's biggest battery producer, is already building three factories in Europe — in Germany, Hungary, and a joint venture with Jeep owner Stellantis in Spain. A spokesperson told Business Insider the company was considering expanding its manufacturing facilities further, in line with market demand.

CATL is also embarking on a hiring spree, recruiting about 1,800 employees at its German plant and planning to add more than 1,300 staff in Hungary by the end of the year.

As scrutiny over Chinese firms operating in Europe escalates in recent years, manufacturers including CATL and BYD have sought to localize production by building factories in European countries.

In CATL's case, the push to blend in reportedly included adding bratwurst and German barbecue to the menu at its German factory.

As well as building batteries, CATL is also looking at ways to recycle them.

A spokesperson told BI the company was "exploring strategic partnerships" with local firms to build a battery recycling network in Europe.

The European scale-up comes at a key moment for CATL, which has grown rapidly thanks to enormous state support and China's stranglehold over the global battery supply chain.

CATL is gearing up to go public in Hong Kong in a $5 billion offering and recently struck a deal with Chinese EV maker Nio to develop a battery-swapping network for electric vehicles in China.

The demise of Northvolt, widely seen as the continent's most promising battery startup, has left Europe's home-grown battery industry struggling to compete.

"Northvolt bit off more than it could chew," said Sam Jaffe, principal at 1019 Technologies, which advises companies on the battery industry. "They were trying to build six gigafactories in different parts of the world all at once, and they should have just concentrated on just one."

Europe's battery blues

Jaffe said Northvolt's investors were expecting unrealistic "venture-like" returns from the capital-intensive business.

While Northvolt's failure won't be a "death knell" for Europe's efforts to build EV batteries, he said ownership of the continent's battery industry was likely to be dominated by Chinese and Asian companies.

That prospect has sparked some soul-searching in Europe. Julia Poliscanova, a senior director of the Transport & Environment thinktank, said the European Union had failed to turn world-class battery R&D into a successful manufacturing sector: "Northvolt is just a symptom of the problems that we have in Europe."

She said the EU should learn from the "Chinese playbook" as it looks to build a competitor to CATL, sticking with consistent EV policies and overhauling trade rules that allow Chinese battery makers to import their products at a 1.3% tariff.

Poliscanova also urged Europe to explore measures that would force Chinese manufacturers to partner with European rivals and share vital knowledge if they want to do business on the continent.

China adopted similar joint-venture rules with its auto industry in the 1990s. They proved a powerful tool in helping Chinese carmakers catch up with Western competitors.

"The Chinese didn't wake up being good at battery manufacturing — they've simply been doing it for a lot more years," said Poliscanova. "The problem is that today in Europe, we don't have all those years to learn and fail."

Shifting geopolitical tensions are likely to only make Europe a more tempting target for Chinese firms.

China's EV giants such as BYD have been locked out of the US by high tariffs, but are expanding rapidly in Europe due to less restrictive trade barriers. Jaffe said the battery industry could follow a similar playbook.

"I think we're going to see a clear demarcation between the North American battery industry, which is going to be mostly Korean partnerships with local companies, and the European battery industry, which is going to be more partnerships with Chinese manufacturers," he said.

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