The rise and fall of Northvolt, and what it means for Europe’s EV battery market

TL;DR

• Founded in 2016 with ambitions to create the world’s greenest battery cell, Northvolt quickly expanded across Europe and into North America, partnering with the likes of Volkswagen and Volvo, and securing more than $55 billion worth of orders.

• In November 2024, it filed for Chapter 11 bankruptcy in the US with debts of around $5.84 billion and just one week’s worth of operating cash remaining.

• Without Northvolt, Europe’s battery cell capacity is expected to fall by 186 GWh by 2030, and the region will largely rely on Chinese companies to make up the shortfall.

• Its sudden collapse has exposed issues with the European battery industry, including a lack of knowledge, investment, technology and funding, as well as a lack of demand for electric vehicles.

• Europe seeks to have 90% of its electric vehicle batteries produced locally by 2030. There are hopes that a scaled-back version of Northvolt can still contribute to the creation of a homegrown European base for battery production.

The detail

In Europe, one company has dominated the battery cell industry for the last eight years: Northvolt. Founded in October 2016 by former Tesla executive Peter Carlsson and with headquarters in Stockholm, Sweden, the enterprise set out to develop the world’s greenest battery cell and establish a supply of batteries for the continent.

It expanded quickly. From closing its initial funding round of $12 million in January 2017 to producing its first battery module prototype the following February, by 2023, the company had over $55 billion worth of orders in the pipeline and employed more than 5,000 people. With locations across Sweden, Poland, Germany, Canada, Norway and Portugal, Northvolt also built partnerships with the likes of Volvo, Epiroc, Scania and Volkswagen. It delivered its first cells to customers in May 2022 and raised $12 billion to fund its expansion plans in August 2023. Innovation also continued with the launch of its state-of-the-art sodium-ion battery in November 2023.

Arguably the most impressive aspects of the company, aside from its rapid growth, were its sustainable production processes and adoption of circular economy principles. In its first year of operation, Northvolt partnered with Chalmers University in Gothenburg, Sweden, with the aim of industrialising the recycling process for lithium-ion batteries. It also launched a recycling programmed called Revolt, invented a mobile energy storage system known as the Voltpack Mobile System, and joined forces with Hydro to launch Hydrovolt, an electric vehicle battery recycling facility.

From leading light to failing enterprise

This glittering success story came crashing to a halt in November.

Northvolt filed for Chapter 11 bankruptcy in the US with debts of around $5.84 billion and just one week’s worth of operating cash remaining (approximately $30 million). CEO Peter Carlsson also announced he would be stepping down. Having received more than $10 billion in equity, debt and public financing since 2016, the company folded, owing $313 million to the European Fund for Strategic Investments. Meanwhile, Germany has been forced to assume more than $629 million of debt that its development bank extended to Northvolt for the construction of a plant in the country.

It was a sudden downfall for the most developed battery manufacturer in Europe, but perhaps not unexpected. Despite Volkswagen and Goldman Sachs each owning around one fifth of its shares, Northvolt needed to find between $1 and $1.2 billion of extra funding by end of March to cover its restructuring. In the months leading up to the November filing, it had started to scale back and cut jobs, but these efforts weren’t enough to overcome its biggest challenge – a struggle to produce high-quality batteries at large enough quantities. Perhaps the final nail in the coffin was the loss of a €2 billion BMW contract in June.

Addressing Chinese dominance

In fact, the European electric vehicle market, and the battery supply chain that would power it, have failed to gain traction in an industry dominated by China.

The collapse of Northvolt is simply another blow to the region’s ambitions. Its production capacity of 16 GWh accounted for less than a tenth of Europe’s total battery output but was expected to increase fourfold by 2030. Ideally, it would have helped Europe’s overall capacity to grow from 192 GWh to 1142 GWh but that figure is now expected to fall by 186 GWh by 2030.

Currently, this gap is being filled by Chinese manufacturers. China controls 85% of global battery cell production and, according to experts like Andy Palmer of consultancy Palmer Automotive, the Chinese industry is 10 years ahead of the West in terms of battery technology thanks to its advanced understanding of battery chemistry, mass production and equipment manufacturing needs.

Asian companies are already making strides in Europe. More than 30 gigafactory projects have been designed and built with support from Chinese and Korean companies. LGES and SK On both have European plants, while CATL has one factory in Germany and plans to open a second in Hungary next year.

That’s not to say there aren’t other homegrown competitors that could take Northvolt’s place, and thus help the EU meet its target of having 90% of its electric vehicle batteries produced domestically by 2030. Several European companies have invested tens of billions of dollars to serve the continent’s car makers as they make the switch from internal combustion engines to electric vehicles.

Start-ups like Verkor in France and PowerCo in Germany have potential. Verkor has Renault as its main client and recently finalised a funding round of €1.3 billion to build a new plant in Dunkirk. However, despite being backed by Volkswagen, PowerCo has recently scaled back its ambitions and is now building just one of the two production lines planned for its plant in Salzgitter.

A delicate balancing act

Despite electric vehicle demand in Europe growing at a slower rate than projected, the continent could certainly do more to support this burgeoning industry. At least eight companies operating in this space have postponed or abandoned their European developments this year as they have faced myriad bureaucratic hurdles and production problems.

The EU has been trying to balance its investment in clean technologies with slowing the wave of plant closures and job cuts in the automotive sector and heavy industries – but it could be argued this balancing act has left no winners on either side. And that’s before diving into the huge technical challenge of scaling production.

Relying on Asian suppliers is also not a silver bullet solution. There is an ongoing trade dispute between Brussels and Beijing due to the EU tariffs imposed on Chinese electric vehicles, and there are rumours that the European Commission might require Chinese developers to build plants and bring their intellectual property to Europe if they want to access EU subsidies. Korean battery manufacturers are also scaling back their investments in Europe after seeing limited market demand in North America.

There is also, of course, the question around what incoming President Trump will do in regard to tariffs on imported goods.

Scaled-back for success

But what comes next for Northvolt?

Despite its bankruptcy filing, it plans to continue as a scaled-back enterprise. Northvolt Labs and Northvolt Ett, its largest production plant based in Skelleftea, Sweden, will continue to function as normal while Northvolt North America and Northvolt Germany are expected to be maintained too.

A reorganisation will also take place while its production is brought in line with current market demand. Even so, it won’t be smooth sailing, as Robin Zeng said of the company, “they have a wrong design…they have a wrong process…and they have the wrong equipment.”

At the moment, its ambitions appear to be lofty despite its recent set back. Northvolt is framing the Chapter 11 filing as a key step in the company’s strategic positioning. In a statement on the Northvolt website, Interim Chairman of the Board, Tom Johnstone, confirmed that the mission remains to make Northvolt a homegrown, European industrial base for battery production. As a reorganised entity, it hopes to establish a resilient base of operations and a competitive platform for innovation and long-term growth that will eventually lead a more sustainable society.

There are many lessons to be learned from Northvolt’s rapid rise and fall. It’s clear that the company ran before it could walk, taking on large contracts, expanding into several new markets simultaneously, and operating with extremely high running costs (a burn through rate of $30 million a week) – all while failing to effectively scale production to fulfil its orders. And if its Chinese competitors are to be believed, its product and production processes need work.

However, it is also true that, despite being at the heart of European ambitions for a battery supply chain, the EU bloc could have done more to support Northvolt and set it up for success. This support goes beyond financial – greater value could have been derived through helping shift consumer perception of electric vehicles via awareness and targeted incentives, as well as plugging the skills gap in battery production to reduce reliance on Asian expertise.

No matter how Europe chooses to bolster its homegrown battery supply chain, the future of Northvolt could prove critical to the region’s electric vehicle market. We’ll be watching with interest to see how this unfolds.

— Lew 👋

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