Are we deluding ourselves with the establishment of the battery industry in Quebec and Canada? The debate over the environmental damage that the construction of the Northvolt battery factory could cause hides another much more important problem, which is that of the competitiveness of the entire sector of batteries, solar panels and electric cars, faced with competition from Chinese companies. The respected firm Rystad Energy, based in Finland, is very pessimistic about the abilities of Western companies to catch up with their Chinese competitors. At best, they could achieve this in around ten years, but on condition of investing the equivalent of 700 billion US dollars in the sector. For the moment, we are far from it. 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 a large number of patents related to electric cars, solar panels and batteries. Therefore, their research teams are ahead of those working in these areas in the West. As if that were not 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 technology of the battery factory that will be implemented in Quebec could be obsolete before the factory even opens its doors. In more scholarly terms, it is clear that the technology is not yet mature.
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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 the battery factory projects come to fruition, China will still produce nearly 70% of all the batteries on the planet in 2030. By 2030, these projects will lead to a global overproduction of batteries of almost 50%. Worse, Chinese companies are used to practicing dumpingthat is to say, selling their products below cost price to capture markets and knock out the competition.
4) What are China’s other advantages?
China controls most of the production of rare earths needed to make advanced electronics, such as batteries and electric cars. Given rapid technological changes, no one knows how long these rare earths will be essential to battery production. However, Chinese companies have easy access to these rare earths. This is not the case for companies located in Quebec, even if Quebec develops certain rare earth mines. Furthermore, Northvolt is linked to the Volvo company, itself bought in 2010 by the Chinese company Geely. Fortunately, Northvolt also has an alliance with Volkswagen. But in 2023, the market forced Volkswagen to ally with Chinese automakers.
5) Should the Northvolt project be abandoned?
The project does not 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 in this project seem weak compared to the risks involved.