September 30, 2024
September felt like the wrong kind of time travelling. Only backwards. For those of a certain age, the bankruptcy of Tupperware the food storage icon, the lethal mass-destruction of Hezbollah’s paging devices in Lebanon and a US President escaping two assassination attempts for the first time since the 1970’s were flashbacks to very troubled Cold War decades, political volatility and inflationary times. Hmmm…on second thoughts…..maybe not much has changed. And yet, the professional analysts of those challenging times never saw the imminent collapse of the Soviet Union, a mobile digital revolution and forty years of lower interest rates coming. Lesson learned on pessimism hiding progress? Let’s fast forward to today. Perhaps, the bigger existential threat (vs nuclear war) for our planet is climate change and an urgent battle to electrify and decarbonise the global economy. But, the headlines on that battle have darkened too, and not just with catastrophic flooding in Europe and similar destruction in the US post-Hurricane Helene. The decarbonising poster child of the global economy has been the automobile transition away from internal combustion engines (ICE) to battery-powered electric vehicles(EVs). Transition progress up to last year had confounded the commentariat, as sales penetration rates for EVs kept beating forecasts and rocketed from 2% of total sales in 2018 to 18% just 5 years later. Research data from Bloomberg forecast a 33% rate of penetration by 2027 but the media have switched tone. Now, the wording is all about slowing, cooling, delaying, abandoning or even failing. Check out these headlines of recent months: Europe Battery Factory Plans Are In A Shambles – Cleantechnica Ford Shrinks Its EV Rollout Plans As Demand Lags – Wall Street Journal EV Slowdown Steers World Further Off Course From Net Zero – Bloomberg Toyota Cuts 2026 Global EV Output By A Third – Reuters Tesla Sales Fall For second Straight Quarter – The Guardian BMW Cancels $2 billion battery cells contract with Northvolt – Reuters The final headline was a precursor to much bigger headlines for Northvolt in recent weeks. Having raised $15 billion of financing, Sweden’s Northvolt is possibly Europe’s highest profile project with a mission to be an all-in-one shop offering everything from material production and battery making to end-of-life recycling. Those full-cycle ambitions are now ‘on hold’ as the company seeks to put the enterprise on a more secure financial footing. The Guardian summarised the remedial actions as follows: “The Swedish batterymaker Northvolt is to cut 1,600 jobs, in response to “headwinds” blowing through the electric car industry. The battery company announced redundancies across three of its sites on Monday, including 1,000 in Skellefteå, in northern Sweden, where it is suspending the expansion of Northvolt Ett, Europe’s first homegrown battery gigafactory. The company, which has been seen as Europe’s most promising contender to China’s producers, will also cut 400 jobs in Västerås, in central Sweden, where Northvolt Labs is based, and 200 in Stockholm, home to its head office. Peter Carlsson, the company’s chief executive and co-founder, insisted that “overall momentum for electrification remains strong” but that “tough” decisions were needed to ensure the company’s future” There is no sugar-coating that messaging. However, we should remind ourselves that EV battery manufacture has huge technological hurdles and is subject to customer demand and supply chain risk, while trying to keep pace with phenomenal adoption growth rates and a global supply chain land grab. In a more mature sector, battery production would be a classical cyclical manufacturing activity. Now, consider the pace of technology change and the global shift in consumer behaviours. Anyone reminded of the semiconductor chip manufacturing sector? Think back to the 2000s and the huge highly risky investment in fab factories required while the global economy hurtled into the digital age. For years the financial market orthodoxy was that semiconductor chip sector stocks like AMD, Intel, Micron, Samsung, TSMC, ASML, Broadcom or Nvidia should NEVER be owned by investors, only traded. Tell that today to Jensen Huang and his colleagues at the 3 trillion dollar Nvidia chip superstar which is now described as more important to the world economy than the US Federal Reserve. Hyperbole certainly, but this elevation illustrates the emotional rollercoaster the media try to create for an audience gasping at yet another manufacturing rockstar following in Apple’s and Tesla’s footsteps. So too should we be conscious of emotions, and media neediness in the coverage of EV’s cyclical misses and growth bumps. Those nascent bumps and bruises should always be considered in the context of a structural super-cycle for EVs and batteries with a 2050 Net Zero end-game. More specifically, readers should think about how numbers and percentages can tell a story, or not. Also, we should know that the ICE to EV transition is two stories, not one. Try these numbers for size and perspective…. *EV sales are still growing, just not at year-on-year doubling rates (20% vs 100%). *Slowing growth rates on much larger sales bases are still very big numbers. 12 million zero emission vehicles likely to be sold globally in 2024. *The media headlines will say Norway’s EV sales only grew 5% in August. But, you probably won’t read that EVs had 94% market share in Norway last month! *Electric cars and trucks make up 60% of all new vehicle sales in China. *BMW has just passed out Tesla on EV sales in Europe. Tesla sales in Europe are actually off 16% but you probably won’t read that on Twitter/X….as chaotic leadership starts to hurt brand. *Now the story that nobody reads. Global fossil-fuel ICE vehicle sales are DOWN by 25% since 2017, and the global ICE vehicle fleet is set to peak in 2025. *Oh, and 97% of Chinese consumers say their next vehicle will be all-electric. The cyclical aspect of manufacturing is often missed when there is a massive structural shift happening across decades. Every time one reads a new sales or growth figure for EVs, one should be checking the ICE figure too. The shift is massive and happening at a rapid pace. However, bear in mind the semiconductor industry analogy. Customers can disappoint, technologies and innovations can go wrong, manufacturing infrastructure can be delayed and interest rates/money can get tight. That’s the manufacturing business which Northvolt is seeking to revolutionise. But buckle up, EVs are the future and are still our planet’s best bet to ensure time for travel…