The story of Northvolt, once hailed as Europe’s beacon in the battery industry, mirrors a gripping Nordic noir tale, filled with aspirations of global control, clashes of egos, colossal investments, and mysterious tragedies. It’s a compelling saga that culminated with the Swedish start-up filing for Chapter 11 bankruptcy this past Thursday.
Northvolt emerged in 2016 with a bold vision: to challenge the dominance of Asian giants in battery production. This ambition energized Europe, positioning Northvolt as a key player in the green energy shift, only to highlight its struggles against the formidable financial incentives offered by China and the U.S. under President Biden.
Now on the hunt for an additional $1.2 billion in investment on top of the $15 billion it has already secured, Northvolt’s future hangs in the balance. “The initial promise was overwhelming, and now it seems incredibly disheartening. We’ve been on a wild rollercoaster,” remarked a former Northvolt executive the day after co-founder Peter Carlsson stepped down as CEO.
Carlsson, along with ex-Tesla colleague Paolo Cerruti, initiated Northvolt with the hope of leveraging the Nordic region’s green energy resources to rival companies like China’s CATL and BYD. These batteries are pivotal for Europe’s automotive sector, which employs millions across the continent. The promising start attracted major European industrial giants, from Volkswagen and BMW to Siemens and ABB, accumulating $55 billion in customer orders by 2022.
Initially, the plan was to establish a single factory in Skellefteå, Sweden, where production began in late 2021. But enthusiasm led to ambitions beyond Sweden, with plans for additional factories in Germany, Canada, Poland, and expanded operations in Sweden. Despite these grand plans, Northvolt’s struggle to ramp up production in Skellefteå became its Achilles’ heel, reaching less than 1% of its potential output last year.
Reflecting on the situation, Carlsson admitted, “I should have hit the brakes on expansion earlier to ensure our core functions were on track,” acknowledging the operational hurdles faced. Challenges included staffing with talent from over 100 nationalities, adapting new processes amidst the pandemic, and managing Western demands on Asian machinery, which led to further complications.
The geographic isolation of Skellefteå made attracting necessary talent difficult, according to sources close to Northvolt. “In a corporate setup, assistance is just a call away. We’ve struggled to replicate that support,” one insider mentioned, pinpointing additional woes like safety lapses, mismanagement, and wasteful spendings.
Running a battery factory without hitting scale economies proved financially draining. Northvolt recorded a net loss of $1.2 billion last year, and by bankruptcy day, its reserves had dwindled to a mere $30 million, with outstanding debts of $5.8 billion.
The outside world first received a hint of Northvolt’s troubles after a factory explosion in Skellefteå claimed a worker’s life. This heartbreaking incident caught the attention of Swedish prosecutors, who later investigated allegations of gross negligence. Following this, operations were disrupted, affecting deliveries to Scania. BMW, Northvolt’s early investor, withdrew from a $2 billion deal due to concerns about timely deliveries.
Later tragedies struck, with three Northvolt workers passing away under mysterious circumstances in early 2024, leading to ongoing police investigations. As financial strains mounted, strategic fundraising efforts faltered. Without backing from the Swedish government—unlike Germany and Canada who have pledged billions—the challenge grew insurmountable. A potential rescue package fell apart at the last minute, leaving Northvolt with limited options, forcing the Chapter 11 bid in the U.S., accessible to foreign entities operating stateside.
Discontent simmers among Northvolt’s shareholders, criticizing management and the lack of cohesion between Volkswagen and Goldman Sachs, the largest stakeholders. “It’s not just about the money but also its judicious use,” one shareholder lamented, pointing fingers at logistical missteps and questioning Sweden’s lack of support.
Despite the bleak outlook, Northvolt’s new management remains hopeful, aiming to bounce back by first quarter of 2025. Plans are underway to secure $1-1.2 billion more in funding, streamline operations, and possibly divest or partner in non-core ventures. Northvolt intends to recalibrate its plan by focusing internally and delaying new factory developments.
As outgoing CEO Carlsson stated, “We’re readying for a clean slate, and I believe wholeheartedly in our strong future.” Meanwhile, critics point to thriving Asian battery producers scaling up quickly and cost-effectively. BMW has already shifted allegiance to Samsung for its substantial contract, while companies like CATL expand in Europe to meet rising demands.
“This is an intense battle,” remarked a Northvolt employee. “Without decisive action, we risk European innovation being overshadowed.”
