Northvolt goes bankrupt as Europe releases Automotive Action Plan
Image courtesy Northvolt
One week following the release of Europe’s Automotive Action Plan, Northvolt – widely called the continent’s best hope at sector competitiveness – filed for bankruptcy in Sweden.
According to the company in a release, the move came following an ‘exhaustive effort’ to secure the company’s financial future.
Northvolt aimed to capture 25% of Europe’s battery market by 2030 but rising capital costs, geopolitical instability, supply chain disruptions and shifts in market demand eroded the company’s financial position. The company also cites significant internal challenges in its ramp-up of production.
Commenting in a release was Tom Johnstone, interim chairman of Northvolt’s Board of Directors: “This is an incredibly difficult day for everyone at Northvolt. We set out to build something groundbreaking — to drive real change in the battery, EV and wider European industry and accelerate the transition to a green and sustainable future.
“The outcome is especially hard considering not only the level of engagement and interest we held with potential partners and investors in recent months, but also the clear improvement and upwards trajectory that we have been seeing in Northvolt’s production in Skellefteå, where cell output from serial production lines has doubled and we have secured a 50% improvement in production yield since September.”
In November the company voluntarily filed for Chapter 11 reorganisation in the US, enabling them to restructure their debt and attempt to scale business to current customer needs.
Following the filing in the US, the company underwent leadership changes. Peter Carlsson stepped aside as CEO, after leading the company since its inception in 2016. Then in January this year, Paolo Cerruti, one of the company’s co-founders, stepped aside from his role as CEO of Northvolt North America.
The company, however, was unable to secure the necessary financial conditions to continue in its current form and the entities Northvolt AB, Northvolt Ett AB, Northvolt Labs AB, Northvolt Revolt AB and Northvolt Systems AB filed with the Swedish court.
Northvolt Germany and Northvolt North America, however, are not filing for bankruptcy in their respective jurisdictions.
Said Johnstone: “We are hopeful that the outreach we have undertaken with potential investors during the Chapter 11 process will accelerate identifying the necessary financing to allow continued trading under the Swedish bankruptcy process.
“The passion, dedication, and innovation of our team has been nothing short of extraordinary, and we deeply regret that there is not a different path forward.”
Industrial Plan
A week prior to Northvolt’s bankruptcy, the Commission released their Industrial Action Plan for the Automotive sector.
The plan makes available €1.8 billion ($2 billion) to create a secure and competitive supply chain for battery raw materials, aiming to support the growth of the industry.
At the time, said European Commission president Ursula von der Leyen: “There is so much untapped potential at the global market, when it comes to innovation and clean solutions. I want to see our European automotive industry taking the lead. We will promote domestic production to avoid strategic dependencies, especially for batteries production.”
The Commission considers it crucial that Europe achieves cost-competitive EU cell production that would cover a large part of the supply of batteries. With its action plan, the Commission has provided further support for the EU battery industry to establish a strong European production base, with financing under the Innovation Fund.
The Commission will also investigate direct production support to companies producing batteries and non-price criteria for components such as resilience requirements.
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Battery competitiveness
Northvolt was hailed as Europe’s best hope for a battery champion at a time of immense competition in the sector coming from the likes of China and the US.
European NGO Transport & Environment in December last year, after Northvolt filed a Chapter 11, called their collapse indicative of shortcomings in stamina and leadership for Europe to realise its battery ambitions.
Said Transport & Environment in a statement: “The EU’s ultimate Achilles heel is its failure to put its money where its mouth is, and deliver a sizable green investment fund to scale cleantech amidst fierce competition. Batteries might be abundant and cheap today, but not having any locally embedded expertise puts Europe at a significant resilience risk.
“China’s current success has been in part enabled by the government’s cheap credit lines to battery, component and mineral producers.
“Europe’s tight fiscal rules are suffocating its own clean and digital tech goals and must be revised. T&E estimates that at least €50 billion of public finance is required to support the local battery value chain by 2030, as a mix of grants, loans and de-risking tools.”
Following the filing, a Swedish court-appointed trustee will now oversee the process, including the sale of Northvolt’s business and its assets and settlement of outstanding obligations.
The process will be conducted in accordance with Swedish insolvency law.
