Northvolt had all the trappings of an industrial champion. Capital had poured in from Wall Street titans such as Goldman Sachs and BlackRock. Assorted governments had blessed its plans with generous grants and big customers had vouched for its technology. But on September 23rd the seven-year-old Swedish battery-maker announced that it would suspend work on one of its new manufacturing plants, slow the expansion of its research and development (R&D) unit and lay off a fifth of its workforce. It was the second round of cutbacks in a month.
Peter Carlsson, Northvolt’s boss, has blamed “headwinds in the automotive market, and wider industrial climate”. Carmakers, including Northvolt’s biggest investor, Volkswagen, have struggled with the economics of electric vehicles (EVs), with some posting losses from their electric divisions. Demand for EVs has slowed, draining demand for the cells that power them. Even big battery-makers like South Korea’s SK On and LG Energy Solution are facing thinner margins. Northvolt lost $1.2bn last year, four times its loss in 2022.
Yet Northvolt’s bigger problem is self-inflicted. As its cumulative funding in the form of debt, equity and grants swelled to $15bn last year, the company spread its technology bets far and wide. It developed a new sodium-ion cell battery, invested in wood-based batteries with Stora Enso, a paper company, and backed batteries for aviation through Cuberg, a startup it bought in 2021. It expanded its R&D facility and waded into artificial intelligence—in vogue with investors—as it set up a new software team. It backed Liminal, a battery-analytics startup, and entered joint ventures such as an R&D centre with Volvo Cars and a Portuguese lithium refinery.
As a result of this splurge, 2023 was its “heaviest investment year”, Northvolt said, with investment averaging $200m-300m a month. The aim was for Northvolt to become a vertically integrated European battery giant, quickly. With capital-intensive manufacturing sites in Canada, Germany, Poland and Sweden, Northvolt hoped to have more than 150 gigawatt-hours (GWh) of cell-making capacity by 2030, ten times its current capacity. (Sceptics pointed out that if Northvolt’s $15bn pot of funding had gone to incumbent battery-makers, such as the South Korean firms with factories in Europe, it could have almost doubled Europe’s battery-making capacity, to more than 300GWh.)
Instead the young company has been distracted from its central purpose: producing batteries for EVs, on time. On June 20th BMW, a German carmaker, cancelled a $2.1bn order from Northvolt because of delays. None of this should surprise Mr Carlsson: “overrun of plan given multiple expansion projects” is listed as a risk in Northvolt’s annual report. Its problems mar Europe’s efforts to nurture a strategically important industry on the continent.
Reining in Northvolt’s sprawling operations will ease the cash burn, but investors and creditors are getting jittery. Northvolt counts the likes of JPMorgan Chase, an American bank, among the 25 lenders that in January gave it a $5bn loan. Creditors are reportedly set to meet on September 27th to decide whether it can tap that loan. In recent days some lenders have brought in advisers to assess their options if the cash crunch deepens. To avoid a serious crisis of confidence, Mr Carlsson will need to start delivering—promptly—Northvolt’s order book, which was worth $53bn last year. At the same time, he will have to shrink the overcharged company still further.■
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