STOCKHOLM, Sept 13 (Askume) – Northvolt’s surprise decision this week to shrink its operations and cut jobs has raised concerns that Europe’s best attempt to become a domestic electric car battery champion may fail, industry experts and people familiar with the matter told Askume.
Troubled by order delays and the loss of a $2 billion BMW contract in June , CEO and former Tesla executive Peter Carlson said on Monday that the company he co-founded in 2016 will make cathode active materials (CAM) — a critical battery component —Will close down – cancelling plans for Swedish plant and seeking investors for Polish plant.
The Swedish company said it would focus on its core business of making batteries, which are units that store chemical energy.
The decision effectively means that Northvolt, Europe’s most advanced battery maker, has strayed from its original goal of becoming a one-stop shop that works from material production and battery manufacturing to the end of battery life.
The announcement comes just after former European Central Bank President Mario Draghi warned of green technology competition from China in a long-awaited report , raising questions about Northvolt’s ability to become a major force in Europe’s electric vehicle drive.
Andy Leland, co-founder of supply chain specialist SC Insights, said: “Northvolt is a leader in the European battery industry, and if they cannot produce (battery cells), it shows that industrially, Europe will be highly dependent on Asia. The future “depends”.
Benchmark Mineral Intelligence analyst Evan Hartley said ceasing production of cathode active materials would leave Europe “more vulnerable in terms of local production.”
Analysts told Askume that Northvolt was facing problems producing high-quality cells at scale to meet its ambitious targets, while the huge business of CATL (300750.SZ) (002594.SZ) and BYD was a complicating factor.
The company did not comment on the delay in its strategy review but said it would focus on becoming a leader in batteries.
Northvolt will now have to buy its cathode active materials from Chinese or Korean suppliers, a person familiar with the matter said.
Cancelled contract
IEA data shows Northvolt is still losing money despite securing more than $50 billion in orders from customers including top investor Volkswagen AG, part of an effort to reduce Western carmakers’ reliance on China, highlighting Europe’s scramble for electric power.
The Swedish company has secured $15 billion in equity and debt financing from firms such as Goldman Sachs and BlackRock as it seeks to raise more money for its costly expansion, documents show.
Difficulties in battery production and delivery led BMW to cancel $2 billion worth of orders in June, a person familiar with the matter and an industry source told Askume. That prompted a dramatic shift in strategy on Monday.
“The situation becomes more complicated when customers such as BMW cancel orders,” a third source with direct knowledge of the situation told Askume.
An industry source told Askume that BMW decided to end the contract because Northvolt’s batteries were two years behind schedule, meaning they were already obsolete when delivered.
In addition, Volkswagen’s Swedish truck manufacturing company Scania told Sweden’s Svenska Dagbladet in May that Northvolt’s delivery problems prevented it from transporting thousands of electric trucks last year, highlighting a wider problem. Scania declined to comment on the status of orders when contacted by Askume.
The future of Northvolt now looks uncertain.
Its flagship factory in Skellefteå in northern Sweden is still far from full production. Carlson told a Swedish newspaper in July that it aims to reach an initial output of 16 gigawatt hours (GWh) per year by 2026, three years later than the original target, the paper reported.
This raises the question of when the plant will be able to operate at full capacity, with a capacity of 60 GWh per year, enough to produce batteries for 1 million cars per year.
Industry analysts say this could boost Heide in Germany, Heide in CanadaDoubts have been raised about the future of three proposed gigafactories in Quebec and Gothenburg .
Other businesses that could be at risk include the Swedish company’s partnership with Portugal’s Galp Energia (GALP.LS).The installed lithium conversion plant is a joint venture between Swedish battery material recycling company Revolt ET and Hydrovolt, Norsk Hydro (NHY.OL ) .
“They have a recycling project that could be slowed down … they have a potential lithium refining project in Portugal that could be cancelled or delayed,” Leland said.
Northvolt said on Monday it would decide this fall whether to delay any of its three planned gigafactories, but did not give details on other projects.
Despite its difficult position, Northvolt remains well ahead of rivals such as Norway’s Morrow & Freire and Auto Sales Corporation (ACC), the joint venture between Stellantis and Mercedes.
But an industry source and an industry expert who has spoken to some of Northvolt’s customers told Askume that customers were concerned about the situation.
Volvo Cars told Askume in an interview that the joint venture with Northvolt remains part of its strategy and said it could not comment further. Volkswagen declined to comment on the Swedish company’s latest troubles, as did BMW.
A source with direct knowledge of the situation told Askume that the planned launch could be delayed until next year or later because of the challenges facing Northvolt.
Northvolt did not comment on the cancellation of the BMW order, the delay in production targets or the delay in the IPO when contacted by Askume.
“Every barrier requires funding,” said Daniel Brandl, research leader at the Ångström Centre for Advanced Batteries, a battery research group at Uppsala University.
