The recent bankruptcy of Northvolt, once hailed as Europe’s best hope for establishing a strong domestic battery industry, has sent shockwaves across the continent, casting a shadow over its ambitious electric vehicle (EV) and clean energy goals. The Swedish company’s collapse highlights the significant challenges facing European manufacturers in their quest to compete with dominant players from Asia, particularly China and South Korea, in the rapidly growing global battery market.
Northvolt’s Rise and Fall: A Timeline of Ambition and Setbacks
Founded in 2017, Northvolt quickly became a symbol of the European Union’s (EU) commitment to building a competitive, homegrown battery value chain. The company aimed to capture 25% of the European battery market by 2030, securing substantial public and private backing to achieve its ambitious goals.
Key milestones in Northvolt’s journey:
- 2017: Founded with the vision of becoming a leading European battery manufacturer.
- 2019: Raised $1 billion in funding, the largest in European tech history at the time, and announced plans for a joint gigafactory with Volkswagen in Germany.
- 2022: Delivered its first battery to a customer in the car industry and announced plans for a recycling plant.
- March 2024: Construction began on Northvolt Drei in Heide, Germany.
- June 2024: BMW canceled a €2 billion contract with Northvolt due to production delays; plans for a fourth factory in Borlänge, Sweden, were abandoned.
- October 2024: Expansion of Northvolt Ett was suspended, and Northvolt Ett Expansion filed for bankruptcy.
- November 2024: Filed for Chapter 11 bankruptcy in the US, and CEO Peter Carlsson stepped down.
- March 2025: Filed for bankruptcy in Sweden after failing to secure new funding.
What Went Wrong? Unpacking the Reasons for Northvolt’s Collapse
Several factors contributed to Northvolt’s downfall, highlighting the complexities and challenges of building a competitive battery industry in Europe.
Production Problems
Northvolt struggled to scale up production at its Skellefteå gigafactory as planned. Instead of reaching 16 GWh, it only managed 1 GWh. This shortfall led BMW to cancel a $2 billion battery supply contract in June 2024. Production at one of the two manufacturing buildings in Northvolt’s main Skelleftea plant was suspended in late October 2024. Internal production plans showed that Northvolt consistently failed to meet weekly goals for producing deliverable cells since September 2024 and the company did not plan to meet its goal of producing 100,000 cells per week. The delays meant Northvolt lost a 2 billion euro contract with BMW in June 2024
Financial Struggles
Northvolt raised over $14 billion, including a $5 billion loan for factory expansion. However, rising costs and a lack of new investment made it difficult to sustain operations. The company needed around $1.29 billion in additional capital by 2027 but failed to secure rescue funding, leaving the company with little cash and $5.8 billion in debt.
Changing Market Conditions
Demand for EVs in Europe has slowed. S&P Global recently lowered its 2025 EV market share forecast for Europe from 27% to 21%. As carmakers rethink their electrification plans, the demand for batteries has dropped. The biggest hurdle that Europe faces in terms of EV demand growth is affordability and a declining demand in the EU for electric vehicles is harming domestic battery producers.
Geopolitical and Economic Factors
Northvolt faced high capital costs, geopolitical instability, and supply chain disruptions. These issues created additional hurdles for the company and the surge in energy prices has placed additional pressure on battery manufacturers. The battery manufacturing process relies heavily on critical raw materials like lithium, nickel, and cobalt, which are not abundant within Europe.
Leadership Challenges
The company lost investor confidence after its chairman stepped down due to health reasons, weakening its leadership structure. CEO Peter Carlsson also stepped down following the failure to ramp up quality production on time.
Overly Ambitious Goals
Northvolt aimed to manage many parts of the battery supply chain, from material production to recycling. This proved too difficult for a startup and Northvolt’s aggressive vertical integration may have diverted focus from its core battery cell business.
Implications for Europe’s Battery Ambitions
Northvolt’s bankruptcy is a significant setback for Europe’s ambitions to establish a competitive and independent battery industry. The company’s collapse raises concerns about Europe’s ability to compete in the rapidly growing battery market, particularly against dominant players from Asia.
Increased Dependence on Asian Battery Makers
Northvolt’s factories will make up 13% of Europe’s battery production planned for 2030. Its bankruptcy may boost Europe’s dependence on Asian battery makers like China’s CATL and South Korea’s LG Energy Solution, which are already expanding their reach into European startups. Together, China and South Korea supplied Europe with 90% of its batteries last year.
Setback for Green Energy Transition
Northvolt’s struggles highlight the difficulty of scaling up clean technologies from innovation to large-scale production. The company’s failure reflects a broader weakness in Europe’s ability to translate research and pilot projects into full-scale deployment. The collapse of Northvolt underscores the scale of the difficulties in the electric battery sector and Europe lacking a strategy and resolve to do what it takes to build a battery value chain
Economic Impact on Local Communities
Northvolt’s bankruptcy has hit Skellefteå hard. This small town in northern Sweden is home to its main factory and the battery maker was the largest employer in the town with 40,000 residents, with 3,000 workers. The bankruptcy threatens local economic stability, prompting authorities to seek government support. The firm, which specialises in producing batteries for electric vehicles, will now seek to sell both of its factories in the Polish city of Gdańsk and will close its energy storage development and production facility in Poland after the company filed for bankruptcy
The Path Forward: Recalibrating Europe’s Battery Strategy
Despite the setback, Europe remains committed to building a strong battery sector. To achieve this, the EU needs to learn from Northvolt’s mistakes and recalibrate its strategy, focusing on the following key areas:
Strategic Investments and Partnerships
Europe must strengthen investments in domestic battery production and develop partnerships with established battery manufacturers from Asia and North America. Numerous automakers in Europe have already cut, or plan to cut, jobs, and many have closed or plan to close vehicle-producing factories, so a collaborative approach would provide a viable route to a European supply chain.
Securing Raw Material Supplies
Europe needs to secure access to critical raw materials like lithium, nickel, and cobalt, which are essential for battery production. This can be achieved through strategic partnerships, investments in domestic mining projects, and the development of battery recycling technologies.
Streamlining Regulations and Incentives
The EU needs to streamline its regulatory landscape and provide clear incentives for battery manufacturers to invest in Europe. Policy uncertainty around subsidies and incentives has caused some hesitation among investors, so the EU needs to revisit subsidy and incentive programmes that support scaling of the entire value chain.
Focusing on Innovation and Sustainability
Europe should prioritize innovation in battery technology and promote sustainable battery production practices. Developing battery recycling or implementing more sustainable value chains could help address some of the challenges.
Addressing Geopolitical Challenges
The EU needs to address the geopolitical challenges posed by the dominance of Asian battery manufacturers. This includes developing a comprehensive industrial strategy, strengthening trade policies, and promoting fair competition.
Europe’s Battery Landscape: Key Players and Market Dynamics
Despite Northvolt’s struggles, several other companies are vying to become major players in the European battery market.
Competitors
Top competitors of Northvolt include:
- CTNS
- Morrow Batteries
- Ampd Energy
- ElevenEs
- Camel Group
- CALB
- Shandong Sacred Sun Power Sources
- Chaowei Power Holdings
- QuantumScape
- SunPower
- Ambri
- Verkor
- FREYR
- Lithium Werks
- LG Chem
- Simplo Technology
- Panasonic
- SK Innovation
- Tesla
- BYD
- Eesti Energia
- Johnson Controls
- Farasis Energy
Market Size and Projections
The European battery market is expected to experience significant growth in the coming years, driven by the increasing demand for EVs and energy storage solutions.
- The Europe battery market generated a revenue of USD 19,210.6 million in 2023.
- The market is expected to grow at a CAGR of 20.1% from 2024 to 2030.
- The European lithium-ion battery market is expected to reach US$ 30.7 Bn in value by 2032 with a steady growth rate of 12.30%.
- Germany holds a nearly 17% market share in the total European lithium-ion battery market.
Conclusion: A Crossroads for Europe’s Battery Industry
Northvolt’s collapse serves as a wake-up call for Europe’s battery industry. The company’s failure underscores the immense challenges facing European manufacturers in their quest to compete with established players from Asia. To achieve its ambitious goals for a sustainable and independent battery industry, Europe must recalibrate its strategy, focusing on strategic investments, securing raw material supplies, streamlining regulations, promoting innovation, and addressing geopolitical challenges. While the path ahead is fraught with difficulties, Europe has the potential to become a major player in the global battery market, but only if it acts decisively and learns from the lessons of Northvolt’s demise.
