EV battery maker Northvolt has filed for bankruptcy in Sweden after making an “exhaustive effort” to secure a viable future.
The company said in a statement that it had faced “compounding challenges” in recent months, including rising interest rates, supply chain disruption caused by geopolitical instability, and shifts in market demand.
A further factor was “significant internal challenges in its ramp-up of production”. This is a reference to the technical difficulties the company encountered when trying to make batteries at scale. It said some of these were expected, since battery-making is “a highly complex industry”, and others were not.
Northvolt’s primary plant, Ett in Skellefteå near the Arctic Circle, had a maximum capacity of 16GWh but was producing fewer than 1GWh.
Despite liquidity support from its lenders and customers, the company was unable to meet its financial requirements. It will now “pursue all realistic options to obtain financing to continue operating during the Swedish bankruptcy process”.
The court will appoint a trustee to oversee the sale of the business and its assets, and the settlement of outstanding obligations.
Tom Johnson, Northvolt’s interim chair, said in the statement: “The passion, dedication, and innovation of our team have been nothing short of extraordinary, and we deeply regret that there is not a different path forward.
“I want to extend my strongest gratitude to our employees, customers, suppliers, investors, and partners who believed in Northvolt’s mission. I also want to extend the same gratitude for all the support we received from the communities in Skellefteå and Västerås.”
The rise and fall of Northvolt
The collapse follows a tumultuous 10 years during which the company was founded by two former Tesla executives and, four years later, received a $5bn loan from the European Investment Bank, the Nordic Investment Bank, and 23 other lenders.
Northvolt also attracted equity investors: Volkswagen took a 21% stake, Goldman Sachs 19%, with BMW and insurance group Folksam taking smaller shares.
This finance enabled the company to embark on a programme of expansion intended to create a European competitor to the Chinese and Korean companies that dominate the sector.
More specifically, the aim was to capture 25% of the European market by 2030, a goal that appeared to be realisable, given that the company had booked $55bn in orders.
The first gigafactory, Ett (“one” in Swedish) was built in Skellefteå, on the Arctic Circle, and three more were to follow: the Novo plant was to be sited near Gothenburg, Northvolt Six near Montreal and Northvolt Drei near Berlin. Together, they had an investment value of €12.6bn.
In the aftermath
However, Skellefteå struggled to iron out its production problems, and came to rely on the imports of Chinese cathode material and Chinese machinery, which would often require Chinese personnel to operate it.
European think tank Bruegel, in a report on the failure of Northvolt, notes that its story highlights “systemic vulnerabilities” for Europe’s clean-tech industries. This is particularly concerning given Europe’s hopes that the sector will become an important source of economic growth.
The weaknesses include a persistent reliance on foreign suppliers for critical inputs, the challenge of managing the rapid scaling-up of capacity and the difficulty of competing with highly efficient Asian companies.
However, it adds that Northvolt is not Europe’s only player in the battery sector. Other players that Europe can support include Verkor, allied with Renault; ACC, backed by Stellantis; and PowerCo, backed by Volkswagen and China’s Gotion.
Bruegel says the aim of European policy should now be to prevent the wave of pessimism running through the European battery supply chain from “impeding Europe’s collective clean-tech momentum at a critical juncture”.
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