Northvolt, a leading European battery manufacturer, faces considerable challenges impacting its expansion plans.
- BMW’s €2 billion contract cancellation marks a significant setback for Northvolt.
- Production issues have emerged at Northvolt’s Skelleftea plant, delaying capacity goals.
- Investigations are underway following the unexplained deaths of three workers at the Skelleftea plant.
- A strategic review is in progress to reassess Northvolt’s expansion plans and resource allocation.
Northvolt, a prominent player in the European battery manufacturing sector, is encountering several critical challenges that may impede its ambitious expansion plans. The Swedish company has long aimed to reduce Europe’s dependency on Chinese battery suppliers, but recent events have necessitated a thorough reassessment of its strategies.
One of the most impactful developments is BMW’s decision to cancel a €2 billion contract for electric vehicle batteries, opting instead for Samsung SDI, a South Korean supplier. This move represents a substantial blow to Northvolt, especially given BMW’s role as an investor in the company. Consequently, Northvolt is re-evaluating its plans to establish a second factory in Borlange, Sweden.
Further compounding the issue, Northvolt’s primary operational facility in Skelleftea has encountered significant production scaling challenges. Located near the Arctic Circle, this plant has yet to achieve its full production capacity of approximately 16 gigawatt hours, with planned output increases falling behind schedule. The company now projects reaching full capacity by 2026, a timeline adjustment that underscores the operational hurdles faced.
Additionally, the Skelleftea plant is the focus of an ongoing police investigation concerning the unexplained deaths of three recently employed individuals. This tragic development adds another layer of complexity to Northvolt’s operational environment and strategic considerations.
In response to these challenges, Northvolt has initiated a strategic review, expected to conclude in the autumn. This review will involve a comprehensive evaluation of timelines and capital allocation to ensure the most effective expansion of capacity. A spokesperson for Northvolt remarked, “A strategic review is under way at Northvolt, to be concluded in the autumn, involving evaluation of timelines and capital allocation to ensure we are pursuing the most effective build-out of capacity possible. We remain committed to the fundamentals of ambitions we have set out, namely emerging as a leading supplier of sustainable, high-performance batteries.”
Financially, Northvolt has garnered €15 billion in debt and equity to compete with major Chinese manufacturers like BYD. Despite this substantial funding, the company’s latest annual results reveal a revenue of $128 million contrasted by a pre-tax loss of $1.2 billion, a dramatic increase from the previous year’s loss of $318 million. The escalating losses are attributed to heightened research and development, production, and finance costs.
Peter Carlsson, Northvolt’s chief executive, told the Financial Times about the company’s need to demonstrate its capability to compete with Asian suppliers. He emphasised that the strategic review focuses on ensuring the core Skelleftea facility becomes fully operational before any expansive undertakings. Carlsson also mentioned the significant spending on various construction sites, highlighting this as a focal point of the review.
Founded in 2016 by two ex-Tesla executives, Northvolt produced its first electric battery in 2021 and currently employs 5,800 people. Despite the substantial challenges faced, Carlsson remains confident in Northvolt’s potential. He cited strong product performance but acknowledged the pressing need for improved execution.
Northvolt’s strategic review is critical to navigating its current challenges and realising its goal of becoming a leading sustainable battery supplier.
