WionDrive News Desk 
Northvolt, the Swedish battery manufacturer once touted as the cornerstone of Europe’s electric vehicle (EV) ambitions, is now facing significant challenges that mirror the broader struggles of the continent’s EV industry. The company, which aimed to rival Tesla and China’s burgeoning EV manufacturers, is now fighting to maintain its footing in an increasingly competitive global market.
In a stark indication of its current predicament, Northvolt has announced plans to reduce its global workforce by 20% and halt the expansion of its primary factory in northern Sweden. This decision comes as the company grapples with cash flow issues and struggles to meet the production demands of its high-profile customers.
Harald Mix, Northvolt’s founder and a 7.2% stakeholder, has pledged to inject new capital into the company, emphasising its “important role” in maintaining European competitiveness. However, industry experts like Fredrik Erixon, director at the European Centre for International Political Economy, paint a bleaker picture. Erixon suggests that Northvolt could be the “first casualty of the market correction currently underway” in the EV battery sector.
The company’s troubles are particularly significant given its role in Europe’s strategy to build a self-reliant green economy. Northvolt was the inaugural recipient of the European Union’s green aid program, designed to prevent businesses from being lured away by incentives offered under U.S. President Joe Biden’s Inflation Reduction Act. The company had ambitious plans for large-scale factories across Europe and North America, but these aspirations now seem increasingly uncertain.
Northvolt’s rapid expansion may have contributed to its current predicament. Like some others in the industry, such as Rivian, the company attempted to scale up too quickly. By its own admission, some of its teams were not adequately prepared for operating at the required scale. This led to difficulties in meeting customer deadlines and quality expectations, with high-profile clients like BMW and Scania experiencing issues with deliveries and product quality.
Financial figures reveal the extent of Northvolt’s challenges. In 2022, the company’s salaries and social security contributions for staff were more than triple its revenue from customer contracts. Despite securing a $5 billion green loan facility less than a year ago, bringing its total debt and equity commitments to over $13 billion, the company now finds itself short on cash.
The situation has become so dire that Northvolt has engaged consulting firm Teneo for restructuring advice, including contingency planning in case it fails to secure revised terms from its lenders. However, a company spokesman has indicated that significant progress has been made in financing talks over recent weeks, though specifics remain undisclosed.
Northvolt’s troubles are not isolated incidents but rather symptoms of broader industry challenges. The global EV market is facing pressure from slowing demand, falling prices, and an intense race to develop next-generation technologies. Competition in Europe is intensifying, with Chinese battery makers like CATL scaling up their local factories.
The company’s ambitious goal of achieving a global capacity of 230 gigawatt-hours by 2030 now seems in jeopardy. Currently, it’s only operational site, Ett near Skelleftea, Sweden, has a capacity of 16 gigawatt-hours. While Northvolt remains committed to its joint ventures and planned facilities in Sweden, Germany, and Canada, the timelines and potential cost savings for these projects are under review.
Quality issues have been a significant stumbling block for Northvolt. The company has struggled with a high number of faulty cells and an inability to quickly ramp up mass production, leading to increased costs and restricted revenue. These problems resulted in the cancellation of a €2 billion order by BMW in June, citing quality concerns.
Despite these setbacks, some of Northvolt’s key partners, including Volkswagen and BMW, are keeping the door open for future collaboration, contingent on the company’s ability to meet their specifications and scale requirements.
As Northvolt works through its challenges, the Swedish government has made it clear that a bailout is not on the table. The German government reports being in “constant contact” with the company. Some analysts suggest that the European Union may need to intervene, possibly by investigating the implementation of tariffs on batteries.
