Northvolt, Europe’s largest climate tech startup, is considering delaying or scaling back its expansion in Germany, Canada and Sweden.   This comes after shareholder BMW pulled a billion-dollar battery order, concerns over worker safety and its most recent losses reached into the billions.

Sweden’s Northvolt has long been the jewel in the European climate tech crown. It’s Europe’s best-capitalised battery manufacturer and was one of the first startups to get institutions like BlackRock, Goldman Sachs and Baillie Gifford to open their wallets and back the next generation of green tech.

Founded in 2015 Northvolt markets its Skellefteå site – located just shy of the Arctic Circle – as “Europe’s first homegrown battery factory.”  Powered by renewable energy from a hydroelectric plant, it is seeking to sell lithium-ion batteries that reportedly have a 90 per cent lower carbon footprint than leading rivals.  It has also pledged to recycle the vast majority of its components and “close the loop” on the rare materials – such as manganese and nickel – used to make batteries.

Simon Moores, chief executive of Benchmark Mineral Intelligence, says the concept of relying on recycled materials was a “big win” for European car brands against Chinese batteries. “The need to be green was paramount to the entire concept of electric cars and gigafactories in Europe,” he says.  But the key barrier is that “making sustainable, quality lithium-ion batteries is hard.”

Northvolt has to date raised $15bn in debt and equity, including a $5bn loan in January – the largest green loan ever raised in Europe.  And it carries the weight of Europe’s domestic battery hopes on its shoulders.

At the end of June,  Shareholder BMW pulled a billion-dollar battery order, citing production delays, and Northvolt was reassessing the viability of one of its factories. On top of that, there are concerns over worker safety after several deaths at the company’s facility in northern Sweden and its most recent losses reached into the billions.

The last week of June was a particularly tough week for Northvolt. Alongside the cancelled BMW order, Swedish media reported that its plans to open a fourth factory, in Borlänge, Sweden had been abandoned.

Northvolt is not the only battery manufacturer to reassess its construction plans. Fellow European upstart Automotive Cells Company (“ACC”), which counts automotive companies Stellantis and Mercedes-Benz, as well as TotalEnergies subsidiary Saft as shareholders, has halted construction on two of its three planned European gigafactories as it weighs up shifting to battery cells that are cheaper to produce.

Across the last 12 months, global battery manufacturing capacity was higher than demand, which makes competition among gigafactories tighter and will squeeze margins.

Predictions from BloombergNEF suggest that supply will continue to outweigh demand across the next few years – though not all of the forecast supply will come to fruition. “The slowdown in EV take-up has also hit demand for batteries,” says David Bailey, a professor who teaches industrial strategy at Birmingham Business School.

It is not just in Sweden where Northvolt has faced hurdles.

In April 2023, the company’s co-founder, Paolo Cerruti, said that Northvolt would soon decide whether to expand into North America.

The company’s decision to review its expansion plans may have been attributed to the then-recent Inflation Reduction Act (“IRA”) in the United States, which sent shockwaves through the EU’s climate tech industry. The IRA created a competitive landscape for Northvolt, making it challenging for the company to maintain its European operations. The climate tech world’s eyes had been on the US, but Northvolt had also, according to reports, opened dialogues with federal governments in Canada.

Northvolt later announced the construction of a new battery gigafactory called Northvolt Six in Montreal, Quebec, Canada. This would be the company’s sixth production facility, with a planned capacity of 30 GWh. Construction of the first phase of the project was expected to begin in the autumn of 2023 and the first operations were set to commence in 2026. 

However, local eco-activists have targeted Northvolt Six despite the company’s green credentials.  According to The Telegraph, in January 2024 vandals buried nails in trees that the company planned to fell, creating a risk to workers trying to clear them.  In May, incendiary devices were found hidden on the construction site.

As reported today, Northvolt’s chief executive Peter Carlsson told the Financial Times that the Swedish industrial start-up’s board would meet in September and hinted that new factories in Germany, Canada and Sweden could be delayed.

Sources for this article include:

• Trouble at Northvolt: safety concerns, scrapped orders and a factory up in the air, Shift, 27 June 2024
• Northvolt to confirm US expansion plans within weeks, cofounder says, Shift, 24 April 2023
• Northvolt is coming to Canada, Northvolt
• Mysterious deaths cast a shadow over Sweden’s $12bn electric car battery champion, The Telegraph, 1 July 2024
• Northvolt considers cutting back expansion plans, Financial Times, 2 July 2024