Northvolt, once hailed as Europe’s beacon for a thriving battery industry, has shockingly declared bankruptcy in Sweden. The company’s vision to craft the “world’s greenest battery” has faltered, dealing a severe setback to Europe’s aspirations in the global electric vehicle (EV) battery market.
Why Did Northvolt Fail? Northvolt encountered a myriad of obstacles that contributed to its demise. Here’s a breakdown of the key challenges:
Production Woes: Northvolt struggled to ramp up production at its Skellefteå gigafactory, falling short of its target of 16 GWh by a significant margin, only achieving 1 GWh. This shortfall led to BMW scrapping a $2 billion battery supply contract in June 2024.
Financial Struggles: Despite raising over $14 billion, including a $5 billion loan for factory expansion, Northvolt faced mounting costs and a lack of fresh investment, making it increasingly difficult to sustain operations.
Shifting Market Dynamics: The demand for EVs in Europe has decelerated, with S&P Global revising down its 2025 EV market share forecast for Europe from 27% to 21%. As automakers reassess their electrification strategies, the need for batteries has dwindled.
Geopolitical and Economic Pressures: Northvolt grappled with exorbitant capital expenses, geopolitical uncertainties, and disruptions in the supply chain, further complicating its path to success.
Leadership Turmoil: Investor confidence waned after the company’s chairman resigned due to health issues, creating a leadership void within the organization. Source: S&P Global
What Happens to Northvolt’s Assets? A court-appointed trustee in Sweden will oversee the bankruptcy proceedings, determining the fate of Northvolt’s business and debts. Currently, no potential buyers have emerged to acquire the company’s facilities or assets. The future of Northvolt’s 5,000-strong Swedish workforce, predominantly based in Skellefteå, hangs in the balance, with the engineering trade union anticipating job losses for at least 650 members.
Northvolt’s bankruptcy has sent shockwaves through Skellefteå, a small town in northern Sweden where its primary factory is situated. Known as the “Northvolt-effect,” the company’s presence had breathed new life into the town, prompting substantial investments in infrastructure during the economic upswing. As the largest employer in Skellefteå, employing 3,000 workers out of a population of 40,000, Northvolt’s collapse jeopardizes local economic stability, prompting authorities to seek governmental assistance.
Sweden’s Deputy Prime Minister, Ebba Busch, has called on the European Union to revise its clean-tech funding regulations to facilitate Northvolt in attracting a new owner. She emphasized the critical need to expand EU funding to existing battery manufacturers to ensure Northvolt’s survival, cautioning against ceding the “clean industrial deal” to China due to the region’s heavy reliance on Chinese green tech imports.
Impact on Europe’s Battery Industry Northvolt’s downfall represents a significant setback for Europe’s battery sector. The company played a pivotal role in Europe’s gigafactory initiatives, with two major projects:
Northvolt Ett – A facility in Skellefteå, Sweden, ranked as Europe’s third-largest gigafactory by capacity in 2024.
Northvolt Drei – A planned gigafactory in Germany with a 60 GWh capacity. Source: Reuters
Northvolt’s factories were slated to contribute 13% of Europe’s projected battery production by 2030. The company’s collapse could heighten Europe’s reliance on Asian battery manufacturers, including South Korea’s LG Energy Solution and China’s CATL, the primary battery producers in Europe.
Examining the broader landscape, the global battery market is on a rapid growth trajectory, fueled by increasing EV adoption. In 2024, global EV sales surged by 25%, reaching 17 million units. Annual global battery demand has surpassed one terawatt-hour (TWh) for the first time, with EVs accounting for 85% of this demand. Source: EVBoosters
A significant development was the decline in average EV battery pack prices to below $100 per kilowatt-hour (kWh), a critical milestone for achieving cost parity between EVs and traditional gasoline vehicles. This price reduction was driven by lower raw material costs, with lithium prices plummeting by 85% since their peak in 2022, coupled with advancements in battery technology and manufacturing efficiency.
China remains the dominant force in global battery production, responsible for over 75% of all batteries sold in 2024. Chinese battery prices saw a nearly 30% drop last year, making them more than 30% cheaper than European counterparts and 20% cheaper than North American alternatives.
Northvolt’s insolvency raises concerns about Europe’s competitiveness in the rapidly expanding battery market and underscores the urgent need for bolstering domestic production and investing in energy storage solutions.
European Battery Storage Market The European battery energy storage system (BESS) market is poised for substantial growth. Projections indicate that the EU’s BESS capacity could reach 60 gigawatts (GW) by 2030, marking a six-fold increase from 2023 levels. This equates to an annual growth rate of approximately 25% over the next seven years.
Key trends shaping Europe’s battery storage sector include:
Long-Duration Energy Storage – With the proliferation of renewable energy sources, the demand for extended storage durations is escalating.
Vehicle-to-Grid (V2G) Integration – The rise in EV adoption presents opportunities for bidirectional charging, enabling vehicles to supply power back to the grid.
Green Hydrogen Integration – Batteries are increasingly utilized in conjunction with green hydrogen production to enhance electrolyzer performance.
Advanced Battery Chemistries – While lithium-ion remains predominant, research on solid-state and flow batteries is gaining momentum.
Lessons from Northvolt’s Bankruptcy: What This Failure Means for the Industry Northvolt’s collapse offers three crucial lessons that other companies must heed:
Ambition vs. Reality. Northvolt’s ambition to control various segments of the battery supply chain proved overly challenging for a startup. European battery makers are now veering away from this model.
Need for Stable Investment. Establishing a robust battery industry necessitates enduring financial commitment. Northvolt’s demise underscores the importance of unwavering support from investors and governments.
Market Demand Matters. Shifting market dynamics rendered Northvolt’s plans unsustainable. Companies must remain adaptable and responsive to evolving market conditions.
What Comes Next After Northvolt? Northvolt’s bankruptcy deals a significant blow to Europe’s green energy aspirations. It…
