Northvolt's Setbacks Raise Concerns for Europe's Battery Industry
Swedish battery maker Northvolt scales back operations, sparking doubts about Europe's EV battery production capabilities. The company's struggles highlight the continent's dependence on Asian suppliers.
Northvolt, once hailed as Europe's most promising electric vehicle (EV) battery manufacturer, has announced a significant scaling back of its operations, raising concerns about the continent's ability to compete in the global EV battery market. The Swedish company, founded in 2016 by former Tesla executive Peter Carlsson, has decided to halt production of cathode active material (CAM) and focus solely on battery cell manufacturing.
This strategic shift comes in the wake of several setbacks, including the loss of a $2 billion contract with BMW in June 2024 and ongoing delivery issues. The decision to abandon CAM production means Northvolt will now rely on Asian suppliers for this crucial battery component, further highlighting Europe's dependence on foreign manufacturers.
Industry analysts express concern about the implications of Northvolt's troubles for Europe's green technology ambitions. Andy Leyland, co-founder of supply chain specialist SC Insights, stated, "If Northvolt can't produce batteries, it really shows that, industrially, Europe is going to be incredibly dependent on Asia going forward."
The company's struggles are particularly significant given its prominent position in Europe's battery industry. With over $50 billion in secured orders and $15 billion in equity and debt financing from major investors like Goldman Sachs and BlackRock, Northvolt was seen as a key player in reducing Western carmakers' reliance on China, which currently controls 85% of global battery cell production.
Northvolt's flagship factory in Skelleftea, northern Sweden, has faced delays in reaching its production targets. The company now aims to achieve an initial production of 16 gigawatt-hours (GWh) per year by 2026, a three-year delay from its original goal. This setback raises questions about when the plant will reach its full capacity of 60 GWh per year, enough to produce batteries for one million cars annually.
The company's challenges extend beyond production issues. Northvolt's ambitious plans for additional gigafactories in Germany, Canada, and Sweden are now uncertain. Joint ventures, such as a lithium conversion plant with Portugal's Galp Energia and battery recycling projects like Revolt Ett and Hydrovolt, may also face delays or cancellations.
These setbacks come at a critical time for Europe's EV industry. Former European Central Bank head Mario Draghi recently warned about the growing competition from China in green technologies. Northvolt's struggles underscore the difficulties European companies face in competing with established Chinese rivals like CATL and BYD.
"The scrapping of cathode active material production will put Europe at a further disadvantage when it comes to local production."
As Northvolt reassesses its strategy, the company's planned initial public offering (IPO) may be delayed until 2025 or 2026. This situation has left customers and investors anxious about the future of Europe's battery industry and its ability to support the continent's ambitious electric mobility goals.
The challenges faced by Northvolt serve as a wake-up call for European policymakers and industry leaders. As the continent strives to reduce its dependence on Asian battery suppliers and compete in the global EV market, the success of companies like Northvolt will be crucial in determining Europe's role in the future of sustainable transportation.
