In the face of business challenges, European battery company, Northvolt, is preparing for sizable job cuts and restructuring. The Swedish firm has plans to trade, or seek joint ventures for its energy storage and materials divisions, in order to better sustain its floundering primary gigafactory in the north of Sweden. Among Northvolt’s chief issues are sizeable delays resulting from complications at its factory in the Arctic Circle and a slower transition to electric vehicles by European automakers than anticipated.
Having raised €13.5 billion in capital, making it the most well-funded startup in Europe, Northvolt expressed on Monday its intention to halt its cathode active material production. It will instead purchase these from Chinese or Korean companies. The plan also includes finding a buyer or partner for its Gdańsk-based energy storage business in Poland.
Financial backers including Volkswagen, Goldman Sachs, BMW, Siemens, and BlackRock have been committed as Northvolt goes through a cost-cutting process, including the unfortunate decision to reduce its existing workforce of 7,000. The company also disclosed plans to postpone the construction of three additional gigafactories in Sweden, Germany, and Canada. Further information on the scale of the job cuts and delay of the factories will be shared later.
Peter Carlsson, the co-founder and CEO of Northvolt, stated “The process of setting up a standalone battery company is significantly capital-heavy and arduous. We have made great strides so far. It’s now crucial to concentrate on the main business, digest past experiences and expand our principal venture to reliably meet client needs and to assist Europe in establishing a sustainable battery system.”
The European automotive and emerging battery sectors are grappling with uncertainties due to intense competition, primarily from Asia, including China, and the significant investment needed for the manufacturing of electric vehicles (EVs). For the first time, Volkswagen (VW) has signalised the possibility of shutting down factories in Germany, its domestic market; meanwhile, Volvo has reneged on its 2030 commitment to sell only electric vehicles.
In late 2021, Northvolt became the inaugural European firm to manufacture a battery cell for EVs in its own ‘gigafactory’, but since then, it has encountered difficulties trying to accelerate production. The gigafactory, located in Skellefteå, has the capacity to produce 16 GWh annually but its current output is less than 1GWh.
BMW recently annulled a $2 billion contract with Northvolt, instead shifting to Samsung SDI of Korea: a decision influenced by the availability of resources. Despite European operations being delayed due to the lagging adoption of EVs, Korean and Chinese conglomerates are establishing battery factories on the continent.
Northvolt has also encountered obstacles trying to close its ongoing funding round, which is crucial for expanding production in Skellefteå. As a result, the firm has been required to curtail both its investment and expenditure.
As expressed by Carlsson, while this proves challenging, concentrating on their principle enterprise lays the groundwork for the company’s long-term growth. This focus could support western aspirations for the establishment of an indigenous battery industry.
Having launched a strategic review in July, Northvolt plans to concentrate on cell manufacturing in Skellefteå, raising uncertainties about the future of its recycling and materials branch. Another consideration is the company’s development of sodium-ion batteries – celebrated as a pivotal breakthrough in energy storage technology – which do not require lithium, cobalt or nickel. This is significant as industries have been rushing to secure these materials. Although Northvolt is currently looking for buyers or collaborators for its energy storage unit, it may continue developing sodium-ion technology, permitting other firms to manufacture it. © The Financial Times Limited 2024.