Swedish EV battery maker Northvolt has filed for bankruptcy having only enough cash to support a week’s operations. The news broke on Friday (21st November) that the company had filed for Chapter 11 bankruptcy protection in the USA[i], later followed by the resignation of CEO and Co-Founder Peter Carlsson.
It is reported that Northvolt had $5.8 billion in debt at the time of the Chapter 11 filing and just $30 million in cash, having received over $10 billion in equity, debt and public financing since it launched in 2016. The company has said that it will require $1.2 billion in funds to undergo restructuring, something it hopes could be completed by March next year.
The news follows a turbulent few months where the business has attempted to shore up finances through job losses and downsizing, after a $2.1 billion contract with BMW was cancelled[ii]. In addition, over ambition and costly expansion have been blamed, with former CEO Carlsson telling the media: “I should have pulled the brakes earlier on the expansion path to make sure the core engine was moving according to plan.”[iii]
Northvolt’s first factory in Skelleftea, Sweden began battery production in 2021, and further sites were planned in not only Sweden, but also Germany and Canada, along with an energy storage project in Poland.
The EV industry in mainland Europe is facing an uncertain time presently, with EV demand growing at a slower pace than many had projected, alongside stiff competition from China, which controls 85% of global battery-cell production, according to the IEA (International Energy Agency). In addition, the cost of Chinese batteries is falling fast, with BloombergNEF reporting the average cost of lithium iron phosphate batteries has fallen by half in the past year to US$53 per kilowatt-hour. Not long ago, US$100 was considered virtually unattainable. China also dominates the supply of the critical metals, including nickel, graphite and lithium.
Northvolt’s woes impact European car manufacturers too. The Financial Times reports that Northvolt’s largest shareholder, Volkswagen, has written down much of its 21 percent stake in the company over the past year ahead of the Swedish battery maker’s filing for Chapter 11 bankruptcy. It represents a further hurdle for VW which is already planning to close several factories in Germany, as well as lay off tens of thousands of workers amid a slowdown in demand for electric vehicles[iv]. VW invested €900 million ($945.7 miilion) into Northvolt back in June 2019, and a further €500 million ($525.4 million) last year, with VW-owned brands Porsche, Audi and Scania having all become Northvolt customers[v].
Despite the strategic importance of electric battery production, the Swedish government has insisted it will not come to Northvolt’s financial rescue. Swedish Energy, Business and Industry Minister Ebba Busch wrote on X on Friday (Translated from Swedish):
“It is a big message that Northvolt has left for employees, municipalities and companies. The process that has now begun is an important step in reaching a long-term solution. I hope it turns out well.
This is important for Sweden - important for Europe, but also for North America. Batteries are a strategically important technology and in a geopolitically troubled world, we need Western production. Right now, China dominates production and processing, the EU alone accounts for 1% of the global production of battery raw materials.
The EU’s dependence on Russian gas in the aftermath of the Russian invasion of Ukraine will be experienced as a windfall in comparison to our dependence on China for minerals and metals. Northvolt is an important key in the green transition. They have many advantages of high quality and production outside the field of geopolitical tension”[vi].
Northvolt’s collapse has implications for EU taxpayers too- Some of its debts of $5.84 billion are owed to the EU itself, as European Commission spokesperson Veerle Nuyts explained:
“We backed several loans of the European Investment Bank to Northvolt battery factory”, adding that the EU’s exposure – the unrepaid value of the loan — “currently amounts to $313 million, under the guarantee of the European fund for strategic investments”[vii].
The fund, which was set up in 2015, offered €21 billion ($22.07 billion) in funding for infrastructure, innovation and small business. In 2017, the Commission also set up the European Battery Alliance, in a bid to gain European leadership against tough competition from China.
[i] Northvolt AB
[ii] Northvolt's downfall began with BMW battery cancellation
[iv] Volkswagen wrote down majority of its stake in Northvolt over past year
[v] Ibid
[vi] Ebba Busch (@BuschEbba) / X
[vii] Northvolt collapse leaves EU taxpayer on the hook for €293m
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
.jpg)
.jpg)