Northvolt’s giant gigafactory, in the Swedish town of Skellefteå, remains operational for now – Northvolt/via Reuters
On the edge of the Arctic Circle, thousands of employees at Northvolt trudged to work on Friday morning, braving snow, slush and winter darkness, facing an uncertain future.
The company’s giant gigafactory, in the Swedish town of Skellefteå, remains operational for now. But on Thursday night, at a court in New York, Northvolt’s lawyers filed for bankruptcy protection amid a cash crisis for the European battery champion.
Despite raising more than $15bn (£12bn) from investors, bondholders, pension funds and European governments since it was founded in 2016, this week the company had less than one week’s cash remaining – $30m.
Northvolt has blamed its downfall on foundering demand for electric vehicles (EVs) across Europe. Its “capital structure and business plan were premised on the assumption that the electric vehicle industry would continue its pattern of consistent growth”, said Scott Millar, a restructuring adviser at Teneo, in the company’s court pleading.
As investor fervour for EVs reached its peak during the pandemic, Northvolt expanded aggressively across Europe, the United States and Canada, with plans for a network of gigafactories, as the facilities that manufacture car batteries are known.
However, the bottom fell out of the global market for battery-powered cars in 2023 as inflation and hesitant consumer demand led to a slowdown – and in some cases slump – in EV sales.
Analysts at Rho Motion pared back their predictions for EV sales by a quarter, to 8.3m by 2030. In Europe, home to Northvolt’s biggest clients, demand has been particularly weak. Sales are down 3pc so far this year, according to Rho Motion. In Germany, they have fallen by 18pc.
Volkswagen, a major Northvolt customer and shareholder, last month announced plans to shut three factories in Germany, the first closures in its home market in its history.
At the same time, Chinese carmakers have been undercutting their European rivals by flooding the market with cheaper EVs that run on Chinese batteries. This piled pressure on Northvolt, which had aimed to set itself apart from rivals by developing clean batteries with renewable hydropower.
Even though it was producing 60,000 batteries per week and had $50bn in future orders, some of Northvolt’s customers, such as BMW, reduced investments in the company as demand slowed. Government investors, meanwhile, withdrew billions in planned funding after Northvolt scaled back its plans for new factories.
The bankruptcy filing buys Northvolt time to salvage its business. Scania, a core customer owned by Volkswagen, has provided $100m in debt-in-possession financing, a kind of emergency loan, while it has also unlocked $145m in cash collateral.
“Northvolt’s liquidity picture has become dire,” Millar said in a court filing. It has debts of nearly $6bn and has already wound down or pulled the plug on several divisions. Investors such as Baillie Gifford, BMW and Goldman Sachs all face having their stakes wiped out by its bankruptcy.
Peter Carlsson, a former Tesla executive and the company’s founder and chief executive, quit the business on Friday.
“This is an unbelievably emotional day,” he told a press conference. “Ultimately, I must take responsibility for the fact that we have ended up in this situation. I accept that responsibility.
“In hindsight, we were over-ambitious.”
Peter Carlsson, Northvolt’s founder and chief executive, quit the business on Friday – Christine Olsson/EPA-EFE/Shutterstock
The company, what remains of it, is now working with advisors Teneo, Hilco and investment bankers from Rothschild as it seeks a fresh capital injection. Carlsson said the business needs $1bn to $1.2bn in new money to survive. If it fails to raise the money, the business could be sold for parts.
Tom Johnstone, Northvolt’s interim chairman, insisted the bankruptcy filing was a “decisive step [that] will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production”. The company said its restructuring could be completed by early 2025.
While Northvolt has blamed its demise on the disintegration of EV demand, industry experts argue that mismanagement, inflated expectations and a lack of government investment in electrification are also to blame.
Reports have also suggested an over-reliance on Chinese machinery and engineers meant Northvolt lacked in-house expertise. On top of this, the company has endured a series of accidents and tragic deaths at its flagship factory.
Andy Palmer, the former Aston Martin chief executive, says: “The biggest issue is that batteries are not easy to make and Northvolt haven’t satisfied the supply demands of their customers – that is a management issue.”
James Frith, Europe head at investment firm Volta Energy Technologies, says: “Europe needs to rethink how it supports a nascent sector before China eats up the entire value chain.”
If Northvolt cannot be revived, Europe will cede what little gains it had made against China in building up its own battery supply chain. While EV demand has stalled, mandates to sell more green cars mean demand for batteries will grow. If they are not made in factories in Europe, the bloc will be perilously exposed to China.
“Europe needs battery capacity,” says Simon Moores, chief executive of Benchmark Mineral Intelligence. “The pendulum of industrial battery power has just swung east towards China.”
