Northvolt Halts Expansion Amid Contract Losses, Production Delays

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Northvolt, Europe’s hope in the global battery race, is rethinking its ambitious expansion plans amid significant setbacks. Generously supported by European authorities and carmakers, the Swedish company raised over $15 billion and produced its first battery cell in 2021, with plans to open factories in Germany, Canada, and Sweden. However, recent issues have forced the company to press the reset button.

The first major blow came when Northvolt lost a $2 billion contract with BMW to Samsung SDI, the battery unit of South Korea’s Samsung. Further compounding its troubles, production at its Skellefteå factory has significantly lagged after two worker fatalities last year halted operations. Police investigations are currently underway into three separate worker deaths away from the factory.

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Challenges extend to its leadership and strategic planning. High-profile chair Jim Hagemann Snabe, who also chairs Siemens, is on sick leave with no clear return date. Local politicians in Borlänge are also dismayed as Northvolt seems poised to abandon plans for a cathode active material factory there.

Peter Carlsson, co-founder and CEO, revealed that the company is undergoing a strategic review of its business model and growth plans. He suggested that international expansion could be delayed and capital needs reassessed, hinting at a probable scale-back of its production ambitions.

Carlsson emphasized the importance of consolidating efforts at its existing Skellefteå facility, which already boasts a production capacity of 16 gigawatt hours (GWh). Despite this, Northvolt has set a modest goal of manufacturing 1 GWh this year, aiming for only “a handful” more by 2025, highlighting the struggle to scale up output.

This reassessment comes amidst a bleak environment for Europe’s battery industry. Demand for electric vehicles has fallen below expectations, and the U.S. Inflation Reduction Act has lured substantial investment away from Europe. Meanwhile, Asian battery suppliers, particularly China’s CATL, continue to advance their plans.

Despite these challenges, Carlsson reiterated the critical importance of maintaining a robust European presence in the battery industry, both for automotive and energy storage supply chains. He stressed that the coming years are crucial for Europe to establish itself as a key player in this sector.

The broader context for the industry is equally daunting. The global slowdown in EV sales has triggered numerous project delays across Europe. Other energy sectors also face difficulties; for instance, South African utility Eskom predicted further losses despite hopes of turning its first profit since 2016 next year, and Shell anticipated up to a $1 billion hit from halting work on a Rotterdam biofuel plant due to tough market conditions.

As the industry grapples with these challenges, Northvolt’s recalibration could signal a critical period for Europe’s battery ambitions, balancing immediate operational hurdles with longer-term strategic goals.