Europe's largest battery manufacturer, Northvolt, has recently announced its application for bankruptcy protection and is seeking restructuring in the United States.
Northvolt stated that its cash reserves are only sufficient to support operations for about a week, and it has approximately $5.8 billion in debt.
Northvolt's factory in Europe
Founded in 2016 by two former Tesla executives and a venture capital firm, Northvolt is headquartered in Stockholm, Sweden, and currently employs 6,600 people across seven countries. Known as the "European version of CATL," CATL is currently the world's largest battery manufacturer, with sales reaching $48 billion in 2022 and employing around 80,000 people.
Reports indicate that in recent years, several Swedish companies have opted to file for bankruptcy protection under Chapter 11 of the Bankruptcy Code, including Scandinavian Airlines (SAS) and credit management company Intrum. This process allows management to retain control of the company and continue operations.
Sweden's Deputy Prime Minister, Ebba Busch, stated on social media platform X that the government will continue to support the battery industry and hopes that the restructuring will help turn around Northvolt's fortunes. Busch mentioned on Tuesday that the Swedish government does not plan to take an equity stake in Northvolt.
Northvolt was once seen as a beacon of hope for Europe. The continent needs a "Northvolt" to reduce Western automakers' reliance on battery manufacturers from Asia.
According to the International Energy Agency, China controls 85% of global battery production, with batteries accounting for about 40% of total vehicle costs.
It is reported that part of Northvolt's $5.8 billion debt is owed to the European Union. In 2017, the EU established the European Battery Alliance, taking the first step toward building a battery supply chain in Europe, with Northvolt being a key component. Foreign media reported that after investing over €6 billion in budget support for various cross-border battery projects and research and innovation related to batteries, the EU's share of the global battery market increased from 3% to 17%.
Northvolt's management reflects, "In hindsight, we were overly ambitious in achieving our goals." The company's first battery gigafactory, Northvolt Ett, was initially planned to reach an annual production capacity of 16 GWh in 2021 (with a full capacity of 60 GWh). However, to date, the actual annual production of this factory has only been 1 GWh. This raises more skepticism about Northvolt's plans to build three more gigafactories in Heide, Germany, Quebec, Canada, and Gothenburg.
Northvolt's ambition goes beyond just building gigafactories; they aim to achieve self-sufficiency across the entire battery supply chain, including the production of cathode materials, battery recycling, and battery pack assembly, while also venturing into future innovations like lithium metal anodes and sodium-ion batteries.
An overly ambitious approach may be a contributing factor to Northvolt's bankruptcy. The industry widely believes that BMW's cancellation of a €2 billion battery order in June this year nearly overnight altered Northvolt's fate. Just a year prior, Northvolt had revealed its plans for an IPO this year or next, boasting a valuation of up to $20 billion.
Because Northvolt has failed, anyone can easily critique it. The key question this issue raises is, "Why is it so difficult for European manufacturers to produce affordable, high-quality products?”
According to the Financial Times, many of Europe's 30 gigafactory projects are designed and constructed with the help of Chinese and South Korean companies. In fact, European startups still lag behind in their ability to mass produce batteries.
Just two months before Northvolt filed for bankruptcy, CATL CEO Robin Zeng, known as the "Battery King of China," sharply criticized the manufacturing challenges faced by European battery manufacturers. "Incorrect designs, flawed processes, inadequate equipment," he noted, "almost all these mistakes compounded—how can they scale up?" "Without efficient, safe, and affordable batteries, selling electric cars becomes more challenging."
Zeng explained that the chemistry used in the batteries is critical for the battery industry, and engineers must understand the complex processes within the batteries. This means engineers need to have expertise in materials science, yet very few students are recruited by European universities in this field.
He recalled that twelve years ago, former German Chancellor Merkel once asked him during a visit to China why Germany was successful in internal combustion engines and transmissions but could not produce good batteries.
In Europe, compared to fields like finance or semiconductors, graduates in electrochemistry face relatively poorer job prospects. Meanwhile, China continues to train a large number of students in materials science and electrochemistry.
Filing for bankruptcy protection will provide Northvolt with some temporary breathing room. Reports indicate that Northvolt plans to complete its restructuring by the first quarter of 2025.
