Carlsson, co-founder and CEO of Northvolt, the European battery maker, resigned Tuesday, the German business daily reported, a day after Northvolt said it had filed for bankruptcy protection in the US and was seeking a restructuring. Northvolt, Europe’s biggest battery maker, has been described as”The hope of Europe”. US and European media believe the company’s bankruptcy filing will deal a significant blow to both its domestic electric vehicle industry and its own research and development lithium-ion battery.
Source: Swedish battery manufacturer Northvolt AB’s battery plant in Skelleftea, in the north of the country.
Funds for restructuring have not yet been raised
Founded in 2016 by two former Tesla executives, including Carlsson, Northvolt aims to make Europe competitive with Chinese and US manufacturers in the global battery market. Northvolt manufactures lithium-ion, lithium-metal and sodium-ion batteries for electric vehicles. Carlsson is reported to be resigning to become a senior adviser while remaining on the board.
Northvolt said it would seek a chapter 11 restructuring, which is expected to be completed in the first quarter of next year, and the company will remain in business during the restructuring. Through the restructuring, NORTHVOLT plans to raise about $245 million in new financing. Northvolt said the restructuring would help it complete its long-term mission of creating an industrial base for Western battery production. Northvolt will still deliver products to customers and make payments to major suppliers during the bankruptcy.
Volkswagen, Northvolt’s largest shareholder with a 21 per cent stake, said it had taken note of the company’s bankruptcy filing but would not comment on the possible impact on its business. Key stakeholders such as the Swedish government and Volkswagen have expressed hope that Northvolt will recover. Speaking on Social Platform X, Deputy Prime Minister D?na said the government would continue to support the new energy vehicle battery industry and hoped the restructuring would help reverse NORTHVOLT’s fate. However, Ms Bousse had previously said the Swedish government had no plans to take a stake in Northvolt.
Goldman Sachs, Northvolt’s second-largest shareholder, plans to private equity its $896M investment to zero by the end of the year. One Fund representative, speaking on condition of anonymity, said they were shocked by the speed with which Northvolt was splashing its money. Commerzbank analysts said the bankruptcy filing would provide Northvolt with short-term breathing space, but noted that the company had yet to find investors and raise the funds needed to restructure its business.
From“European Hope” to struggle
Why has Northvolt, once considered one of Europe’s most valuable private technology companies, suddenly become a struggling business?
The fall of Northvolt began this summer when BMW cancelled a $2bn contract, according to reports such as POLITICO Europe. In September Northvolt announced about 1,600 job cuts and suspended its Ultimate Factories expansion. In November, Northvolt also sold the assets of Cuberg, a battery start-up it acquired. But Northvolt’s biggest setback came from Volkswagen, the German carmaker, which is facing a downturn and factory closures.
In his resignation, Carlsson admitted that the start-up had made mistakes, according to the Financial Times, “There is growing hesitation and skepticism about the transition among carmakers, policymakers and the investment community,” he said. “It affects us.”
The report noted that right-wing political parties have gained strength after the European Parliament elections in June, and they are increasingly questioning Europe’s green transition. A Northvolt investor said that compared with China’s deliberate and unified policies in this area, the situation in Europe is worrying.
At the same time, Northvolt’s cash crunch has been exacerbated by its ambitious Ultimate Factories. The company reported an operating loss of $1.03bn in 2022 on revenues of just $128m. Northvolt, which raised more than $15bn from investors and the government, had only $30m in cash and $5.84 bn in debt before filing for bankruptcy, barely enough to operate for a week. Carlsson said Northvolt would need about $1bn-$1.2 bn to continue operating. “Northvolt is expanding too fast, announcing more plants before a Ultimate Factories is up and running,” says Wyke Carlsson, a researcher at the Fraunhofer Institute for Systems and innovation, “I should have put the brakes on the expansion earlier to make sure the core engine was running as planned.”
The Australian Financial News Network said Northvolt’s difficulties stem from the company’s inability to scale up production effectively. According to a report by German newspaper the Frankfurt daily, the company’s factory in northern Sweden could have produced 16 gigawatt-hours of batteries a year, enough to power about 270,000 cars, but production last year was less than 1 per cent of that figure.
Expert: be more open to working with Asian companies
The bankruptcy filing by Northvolt represents a setback for Europe’s goal of owning its own battery industry, Reuters said. Public information shows that more than 70% of the world’s lithium-ion batteries are produced in China. Northvolt had been seen as a hope for Europe to build an independent supply chain for electric vehicles and counter the dominance of Asian battery makers. Many European start-ups, led by Northvolt, have invested $zero in battery production, but demand has not grown as quickly as some in the industry had predicted.
Northvolt is not just a company, but a symbol of Europe’s green ambitions, according to financial news. Northvolt’s bankruptcy filing has had a big impact on Europe’s green transition, hampering the continent’s desire to develop a domestic battery industry.
Beyond Northvolt, the outlook for many battery projects in Europe is uncertain. In June, for example, ACC, a battery company jointly owned by Mercedes-benz and Atlantis, suspended construction of two plants in Germany and Italy. According to a study by the Fraunhofer Institute for Systems and innovation, the current capacity announced in Europe is equivalent to about 70 large factories. The researchers believe that more than a quarter of these projects are problematic, meaning that about 20 of the planned plants will not be built.
Wolfgang Isenburg-büdingen Bernhart, an expert at Roland Berger, says Western battery makers lag behind Asian rivals in both technology and operations. He advises the industry to be realistic about the future: “European manufacturers should be more open to working with Asian companies.”