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Who is harmed by the EU’s international policies?

07.01.2025

Since February 2022, the European Union has adopted 15 sanction packages against Russia in response to its aggression toward Ukraine. However, thanks to adaptation and diversification strategies, Russia has shown significant recovery, sending a clear signal that these sanctions are not working as they have not achieved their goal.

It is now widely believed that if the goal is to cripple Russia's economy and industry, there is only one solution left: admitting Russia into the European Union!

This ironic introduction serves to present the case of the Swedish company Northvolt.

Northvolt, founded in 2016, was meant to be Europe’s stronghold of technological independence in the production of lithium-ion batteries for electric vehicles.

Over eight years, Northvolt raised about $14 billion in public subsidies and private financing, including €902 million in German state aid in 2024 for the Gigafactory in Heide, Schleswig-Holstein.

By November 2024, despite significant investments, Northvolt had only $30 million in liquid assets against $5.8 billion in debt. The company then filed for creditor protection and began restructuring under Chapter 11 of the US bankruptcy law.

Northvolt was considered Europe’s most promising green-tech startup and was backed by giants like BMW, Volkswagen, and BlackRock. Scholz, at the Gigafactory inauguration, stated: “Battery production in Europe is crucial for our technological sovereignty.”

According to Bloomberg, 80% of lithium-ion batteries are produced in China, with companies like CATL and BYD dominating the global market. Additionally, six of the world’s ten largest producers are based in China.

While Northvolt struggled to reach a production capacity of 16 GWh at its Swedish plant, CATL was building a factory in Hungary with 100 GWh and announced a €4.33 billion investment in Spain in collaboration with Stellantis.

One final thought deserves special attention: while the EU imposes tariffs of up to 45% on Chinese electric cars, a fundamental strategic paradox persists.

What effectiveness can this protectionist measure have if the most expensive component of an electric vehicle – the battery, which accounts for 35-40% of the total cost – remains under the technological and productive control of Chinese companies?

This question requires serious reflection on the direction of European industrial policy, not only in the automotive sector, and the answer will help determine who will bear the consequences.