"Europe's great hope for battery independence is fighting for survival after the company said it was cutting 1,600 jobs and curtailing expansion plans.
Northvolt was the darling of the European cleantech industry, attracting billions in funding from the world's biggest automakers, banks and governments. Today, as at least one investor questions its relationship with the company, its future seems bleak.
For policy makers in Brussels, the Swedish company's success was seen as key for energy security. Being able to develop a European source of batteries would enable the EU to keep its electric-vehicle ambitions alive without relying on Chinese supplies, as carmakers looked to switch away from traditional combustion engines.
The troubles at Northvolt reflect a worsening market for battery makers in Europe. Slowing demand, high costs and technical difficulties in the face of overwhelming Chinese manufacturing expansion in recent years have meant that producing batteries profitably and at scale has so far proved an insurmountable challenge for Western companies.
Launched in 2015 by former Tesla executives, Northvolt initially opened with a plant in northern Sweden to build state-of-the-art EV batteries using clean energy. The company attracted billions of dollars in investment, largely through debt. By the start of this year, it had secured some $15 billion worth of funds.
Automaker Volkswagen owns 23% of the company, with Wall Street giant Goldman Sachs and carmaker BMW also investing in the company. Volvo Cars signed a joint venture with its Swedish compatriot to collaborate on research and cell design as well as production. Northvolt signed deals for future delivery of its batteries with the European carmakers, giving it a future revenue stream against which it could borrow from other creditors.
But today, its fortunes are fading. Technical issues have mired the Arctic project. The company has managed to produce thousands of batteries, but they haven't been up to automaker standards or met adequate volumes.
BMW pulled $2 billion of orders from Northvolt after the company was unable to meet an original deadline to deliver its batteries.
"Northvolt and the BMW Group have jointly decided to focus Northvolt's activities on the ambition of developing next-generation battery cells," a representative for BMW said. "The BMW Group has a strong continued interest in the establishment of a high-performance circular and sustainable battery cell manufacturer in Europe."
A representative for VW said it is in close contact with Northvolt and is supporting the industrial ramping up of production lines, while Volvo said Northvolt remains part of its strategy for supply-chain diversification. Goldman Sachs didn't provide comment.
Recently, Northvolt said it will cut 1,600 jobs in Sweden and it is abandoning efforts to double the size of its plant in Skelleftea, in northern Sweden. Last month, the company outlined a strategic review and said it was seeking a partner to produce batteries in Poland, and was also putting its lithium refinery plans on ice.
"This narrative is bigger than Northvolt. Asian manufacturers generally and Chinese manufacturers specifically are in the lead, very clearly," said Jeffrey Chamberlain, chief executive of cleantech venture-capital company Volta Energy Technologies.
A recent report from BloombergNEF showed the market is oversupplied in terms of manufacturing capacity. By 2025, BNEF estimates there will be 7.9 terawatt hours of global capacity, compared with a projected demand of 1.6 TWh.
"The idea that a startup can catch up and manufacture cells of equal or better quality at volume might have been viable 10 to 15 years ago, but it is increasingly becoming incredibly challenging," Chamberlain said.
Northvolt's fate echoes that of others within the battery industry. Last year, Britishvolt, a battery production startup, collapsed due to technical issues and a lack of funding.
"It feels like recent history repeating," said Ben Kilbey, former chief communications officer at Britishvolt and founder of Bold Voodoo, a communications agency." [1]
Britishvolt, Swedishvolt, Down-the-drainvolt... The demand for inexpensive, good quality, cleantech will be huge, but in Global South, not in the losers of Global West.
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