Once the "hope of the whole village" in the European battery industry, now it is overwhelmed.

On November 21st local time, Northvolt, the largest lithium battery manufacturer in Europe and a Swedish company, announced on its official website that its parent company Northvolt AB, and some of its subsidiaries have filed for Chapter 11 bankruptcy protection in the United States and are seeking restructuring.

Founded in 2016, Northvolt is the most funded startup in Europe, having received more than $15 billion in financing from investors such as Volkswagen, Goldman Sachs, and BlackRock, as well as the governments of Germany and Canada. However, court documents submitted by Northvolt show that as of the time of the bankruptcy filing, the company only had $30 million in cash left, enough to sustain operations for a week, and was also carrying a debt of $5.84 billion.

One of Northvolt's co-founders and former Tesla executive, Peter Carlsson, also recently announced his resignation. He admitted that the company's rapid expansion and factors such as the COVID-19 pandemic and poor internal communication led to severe delivery delays. In addition, some internal employees have told the media that the company also has other issues such as poor management, excessive spending, and poor safety standards.

As the only mainstream electric vehicle battery manufacturer in Europe, Northvolt has always been seen as the hope to counterbalance Asian battery manufacturers.

Advertisement

In March of this year, German Chancellor Scholz personally presided over the groundbreaking ceremony for Northvolt's "gigafactory" in Germany, stating that high-quality automotive production projects other than internal combustion engine cars will continue to be the backbone of Germany's industrial sector. "For this, we need batteries made in Germany, made in Europe."

Northvolt is the result of a collective European effort to transition to clean energy, and it seems that this result currently has no market competitiveness. "It is almost impossible to support another one," he said.

Holding $55 billion in orders but unable to deliver.

Northvolt is not worried about sales in Europe, but unfortunately, it has not formed the ability to deliver finished products. As of the beginning of this year, the company has obtained orders worth $55 billion from major customers such as BMW, Scania, Volvo Cars, and Volkswagen Group. Unfortunately, in June of this year, due to the latter's inability to deliver products on time, BMW canceled its $2 billion battery cell purchase contract with Northvolt and turned to South Korean battery manufacturer Samsung SDI. This also dealt a heavy blow to Northvolt: the company subsequently announced layoffs and cost-cutting measures, while also looking for new financing.

Since the second half of last year, the sales of electric vehicles in Europe have continued to slow down, and as a result, at least 8 companies have postponed or abandoned electric vehicle battery projects in Europe this year.

In June of this year, ACC, a battery company jointly invested in by European carmaker Stellantis, Mercedes-Benz, and TotalEnergies, announced the suspension of its battery factory construction projects in Germany and Italy, and plans to switch its production line from ternary lithium to lithium iron phosphate batteries.

Domestic power battery company Hive Energy also decided last month to suspend the construction of its two battery factories in Germany. BASF, a German chemical giant located upstream in the battery supply chain, also announced in July the suspension of several projects, including a nickel-cobalt production facility in Indonesia in cooperation with a French mining group, lithium mine investments in Chile, a battery production base in Germany, and a battery recycling factory in Spain.

Battery production is a capital-intensive investment that consumes a large amount of cash and can significantly affect financial indicators. Therefore, issuers are adjusting their investment plans according to realistic demand. Volkswagen has reduced its investment plan (for 2023 to 2027) from $190 billion to $170 billion, and other issuers are following suit. The automotive sales mix is also shifting from pure electric vehicles to include hybrid vehicles.

She explained that the previously expected growth trend towards a 100% electric vehicle transition has raised concerns about battery supply security, and European car manufacturers are trying to ensure production to support a faster transition. Now, as this trend slows down, they choose to keep cash reserves.

Over the past 5 years, the EU has passed a package of laws related to clean energy and carbon dioxide emissions. However, affected by factors such as inflation and economic slowdown, the radical and costly green transition has also begun to face more questioning, which also made the "European Green Deal" a target of attack in the European Parliament elections in June this year.

Carlsson, who has resigned, also spoke out, expressing his hope that Europe should not only focus on the current weak electric vehicle sales situation and not give up on the dream of creating battery champion companies to compete with dominant Asian competitors. He told the media, "Automotive manufacturers, policymakers, and the investment community are increasingly hesitant and questioning the speed of the transition. This has affected us. If we do not continue to move forward and dare to promote the green transition, we will regret it in 20 years."

According to the official EU website, by 2025, the average carbon dioxide emissions of car companies need to reach 93.6g/km (under WLTP standards). From 2035 onwards, EU cars and vans need to achieve zero carbon emissions, that is, full electrification. Scher said that the goals of policymakers are expected to remain unchanged.

Asian battery manufacturers fill the gap.

Northvolt was so ambitious when it started, which makes its current defeat even more embarrassing. According to reports, German car manufacturer Volkswagen and asset management company Goldman Sachs are the two largest shareholders of Northvolt, holding 21% and 19% of the company's shares, respectively. Other shareholders include venture capital firm Vargas, the Danish ATP pension fund, and car manufacturer BMW, among others.

In addition, governments and public institutions including the European Investment Bank (EIB) and the German government have also promised to provide more than 2.7 billion euros to the company, although some of the funds have not yet been received.

EIB Vice President Ostros said that the EIB has always been a constructive partner of Northvolt, but needs to protect the interests of the EIB and the EU. "Europe still has a strategic interest in the electric vehicle battery industry, and we will closely monitor the development of the situation. But it is too early to say what the outcome will be."

A report released by Fitch Ratings in July pointed out that by 2035, Europe will need to increase its battery production capacity by 360 gigawatt-hours to 750 gigawatt-hours per year to achieve carbon neutrality. In 2023, the region's battery production capacity is about 160 gigawatt-hours, and most factories are owned by Asian battery manufacturers.

Even though it is reluctant, this huge gap may need to be filled by Asian battery manufacturers.

Data from the International Energy Agency (IEA) shows that China is in a leading position in the field of electric vehicles, accounting for 85% of global battery production. According to data from market research institution SNE Research, in the first eight months of this year, among the top ten power battery companies globally, CATL is firmly in first place, Chinese companies occupy six seats, and Korean and Japanese companies account for four seats.

The expansion of Asian manufacturers in Europe is also underway.

Chinese battery manufacturer CATL recently told the media that its battery manufacturing factory in Hungary is expected to start production in the second half of 2025. The German factory that has already started production is expected to achieve a break-even this year. Korean battery manufacturers such as LG Energy, SK On, and Samsung SDI are also building factories in Europe.

On August 17 last year, the EU officially announced that from 2027, the export of power batteries to Europe must have a "battery passport" that meets the requirements, and at the same time, it has put forward clear requirements on sustainable development issues such as carbon footprint, battery recycling, use of recycled materials, and due diligence, which will constrain Chinese car manufacturers and battery manufacturers.

The bankruptcy protection application of Northvolt, which was once the darling of all, has dealt a heavy blow to the European domestic electric vehicle industry and the independent research and development of European lithium-ion batteries. Li Xuan said that the future trend should be that Asian battery manufacturing companies will invest and set up factories in Europe, and EU policies can only delay but not stop their expansion.