Northvolt, the Swedish battery maker once hailed as a cornerstone of electric vehicle (EV) battery production in Europe, filed for Chapter 11 bankruptcy protection in the United States on Thursday, marking a significant setback for the continent’s green transition.
The move led to the resignation of co-founder and CEO Peter Carlsson on Friday.
Carlsson will remain on the board as senior advisor. Pia Aaltonen-Forsell, the company’s Chief Financial Officer, will take over as interim CEO.
Who is Northvolt?
Founded in 2016 by two former Tesla executives, including Carlsson, Northvolt aimed to make Europe a competitive player in a global battery market dominated by Chinese and U.S. manufacturers.
Known for its pioneering lithium-ion, lithium-metal and sodium-ion cells, Northvolt has supplied major automakers, including Volkswagen and BMW, and has been instrumental in Europe’s strategy to reduce dependence on Asian imports.
Its flagship factory, Northvolt Ett in northern Sweden, was a symbol of the region’s commitment to green energy.
What happened?
Northvolt’s financial problems stemmed from a combination of ambitious expansion plans, slowing demand for electric vehicles and operational challenges. The company has struggled to scale production effectively, leading to consistent failure to meet production targets. This shortage led to the loss of a $2.1 billion supply contract with BMW in June.
At the same time, Northvolt’s overly ambitious efforts to build multiple gigafactories, including the now-canceled Northvolt Fem in Sweden, have exacerbated its liquidity crisis. The company reported an operating loss of $1.03 billion in 2022, on modest revenue of $128 million. As of November 2024, it had only $30 million in cash reserves, while it had $5.8 billion in debt.
Efforts to secure additional funding, including public grants and private investment, have failed. Production delays and underperformance have added to the challenges, as has reduced demand for electric vehicles in Europe, reflecting broader market volatility.
Implications for Europe’s green transition
With its motto “Make oil History”, Northvolt was not just a business but a beacon of Europe’s green ambitions.
Northvolt’s bankruptcy represents a blow to Europe’s aspirations to build a robust domestic battery industry. China controls 85% of global battery production.
The Swedish government and key stakeholders, including Volkswagen and Scania, have expressed hope that Northvolt can recover. Interim President Tom Johnstone said: “This decisive step will allow Northvolt to continue its mission to establish a home-grown European industrial base for battery manufacturing.”
What’s the next step?
Filing for Chapter 11 will allow Northvolt to restructure its debt, access $245 million in new financing and scale its operations to better adapt to current market conditions.
Northvolt will continue to operate while undergoing restructuring, with its Swedish and international subsidiaries not affected by the bankruptcy filing. The trial, which is expected to conclude in early 2025, aims to establish a more financially sustainable operation.
However, the company still needs to secure between $1 billion and $1.2 billion in additional financing to stabilize.