Troubled Northvolt may struggle to find a buyer

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Peter Carlsson, the co-founder and former chief executive of Northvolt, supposedly joked once about what would happen if the one-time great European hope for the battery industry ran into trouble.

If it all goes wrong, he suggested everyone in the Swedish company would end up speaking German, according to a former senior executive. Carlsson admits making a comment along these lines, indicating it was an expression of the importance of Germany to Northvolt.

Volkswagen, the German carmaker that is Northvolt’s biggest shareholder with a 21 per cent stake, was long seen as the most likely to take over the Swedish battery manufacturing start-up since it first invested in 2019. But with Northvolt now having filed for Chapter 11 bankruptcy in the US and Carlsson resigned, VW is scarcely mentioned as a likely buyer. It and virtually every other European carmaker are deeply mired in crises of their own because of weak demand and an uncertain outlook for electric vehicles, robbing Northvolt of a whole slew of possible saviours.

Another obvious group of potential investors — existing battery manufacturers, dominated by Asian players — are dealing with their own problems, particularly overcapacity in the industry. Another factory, yet alone one in the rather unattractive European market, is hardly top of their Christmas lists.

On top of that, recriminations are swirling among the Swedish group’s shareholders about who is to blame. One target of ire: the Swedish government for not only failing to support Northvolt financially, but also for saying out loud in the middle of sensitive financial discussions that it would not do so. And then seeking to influence any rescue of the start-up.

That is the unpropitious backdrop to Northvolt seeking up to $1.2bn in the next three months to exit Chapter 11. It is one that raises questions about Europe’s appetite for engaging in the fierce competition around the green transition.

The Swedish industrial start-up has said it hopes to finish what Carlsson called “its purification process” in the first quarter of next year. That is due not least to its precarious finances. It filed for Chapter 11 with just $30mn in the bank, despite having raised $15bn in debt, equity, and government subsidies for its battery factory in northern Sweden and planned plants in Germany and Canada. Forecasts in the filing underscore its problems. Revenues for the 13 weeks from mid-November to mid-February are estimated to reach $46mn, according to the filing, while outflows are likely to be $348mn.

Northvolt’s pitch to potential investors is likely to be that they get an expensive package of battery assets for a knockdown price. Northvolt’s property, plant and equipment were valued at $5.2bn at the end of 2023, including its current factory in Skellefteå in northern Sweden as well as land in Germany and Canada.

The start-up’s crown jewel, according to several former executives, is not the Skellefteå plant but its research and development facility, known as Northvolt Labs, in Västerås, close to Stockholm. That location is seen as more attractive to foreign workers than a factory close to the Arctic Circle, and it boasts facilities no other battery maker has in Europe.

Northvolt says it is speaking to all potential partners about its future. A particular focus is on Asian battery makers, including Chinese manufacturers such as CATL. Pan Jian, CATL’s co-founder, told the Frankfurter Allgemeine Sonntagszeitung at the weekend that investing in Northvolt was “not a priority”, but that there was a “possibility that we can help them on the production side”. That could involve sending skilled battery engineers — something Europe desperately lacks.

The Swedish government, despite offering Northvolt almost no financial support, has further stirred the pot by saying that it sees the battery maker’s “western” shareholder base as a significant asset, and that it is important that Europe’s green transition does not become Chinese. That could easily clash with Northvolt’s Asian overtures.

Northvolt’s task for now is to ensure it can carry on making batteries despite the turmoil, and try at last to raise production. Ironically for Carlsson’s joke, it has turned to two new German hires — chief operating officer Matthias Arleth, and head of the Skellefteå factory Markus Dangelmaier — to steer it through Chapter 11. The path for Northvolt to secure financial rescue, industrial triumph and a geopolitical success for Europe appears an increasingly uphill task.

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