Northvolt is an ambitious battery project on the verge of failure despite the billions in investments funneled into the company since 2015. With a vision of manufacturing sustainable, regionally sourced batteries, Northvolt emerged as Europe’s opportunity to curb the dominance of Asia’s battery makers that wanted to set up production in the region. The company secured investments, grants, and loans from investors like Goldman Sachs, Volkswagen, and BMW to build up a European supply chain to further its mission. While completing a gigafactory for cell production, Northvolt also started projects for cathode material manufacturing, battery recycling, and pack assembly and even ventured into future-facing innovations like Li-metal anodes and Na-ion batteries. The far-reaching vision of Northvolt was never going to work, and the company has been forced to scale back operations after coming to that realization.
To understand why Northvolt has fallen so far, we first need to reflect on the timeline of Northvolt’s struggles. First and most obviously, the company has faced significant delays in ramping up battery production. Its first factory, Northvolt Ett, was slated for 16 GWh of production in 2021 and as of now is barely producing 1 GWh annually. Following this slow delivery, BMW canceled a EUR 2 billion order initially made in 2020. Any struggling company will first cut its innovation team, and Northvolt indeed announced the closure of its San Francisco lab that hosted staff from its acquisition of Cuberg. Then in September, Northvolt announced a slew of project cancellations: It will cease cathode active material (CAM) production, it is looking for external partners for battery systems and packs, and the expansion of its initial production facility entered bankruptcy before it could even begin. The expansion project had received a EUR 5 billion loan from the European Investment Bank and other regional banks.
Scaling up battery manufacturing is no easy feat. In fact, any critical analysis of Asia’s top battery manufacturers clearly outlines the steps to success, and Northvolt seems to have ignored the first one: become expert in manufacturing a Li-ion battery. Despite having 16 GWh of installed capacity, the company has struggled to meet 1-GWh annual production; this lag indicates a continued struggle to achieve consistent, high-quality cell output. Although the company owns IP on manufacturing and cell design, it needs to direct its resources to increasing quality and yield rates. Those issues can’t be resolved by building a new CAM factory or starting a battery recycling business. Before Northvolt even started cell production, it was already pursuing materials production, recycling, and pack assembly. On the other hand, companies like CATL, LG Energy Solutions, and Panasonic expanded into taking more control over supply chains only after they had achieved multigigawatt-hour-scale production.
Not all the blame can be put on Northvolt for its failing endeavors. Europe lacks any substantial activity in battery materials production — BASF and Umicore are the top producers, though capacity outside Europe is much greater than within. While investors flocked to Northvolt’s vision of a regionally produced sustainable battery, they failed to support other points in the battery value chain that would help in that endeavor. As Northvolt begins scaling down the scope of its operations to focus on actually producing batteries as intended, investors must look toward upstream battery materials to support Europe’s battery market. Otherwise, Northvolt will be an extremely expensive mistake, while the rest of the world barrels ahead to build more batteries.