Northvolt, the European battery industry’s poster child, has recently cancelled many of its plans, shut down divisions, and announced mass layoffs. A failure to satisfy Original Equipment Manufacturer (OEM) customers is at the heart of its problems, and its competitors must learn to address the challenges of quality, scale, and delivery.
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In September 2024, Northvolt announced a comprehensive scaling back of its operations. It will no longer look to expand the Northvolt Ett gigafactory with an additional 30 Gigawatt-Hours (GWh) of capacity or produce Cathode Active Materials (CAM) at the site, while its plans for a new 100 GWh CAM plant have been cancelled entirely. It is looking to sell part of or all of its Polish battery systems production operations and will close its California Research and Development (R&D) facilities. Its gigafactory projects in Canada and Germany will still go ahead as planned, but overall, Northvolt has laid off 1,600 of its 7,000 employees.
Europe had high hopes that Northvolt would be one of the continent’s few domestic battery manufacturers. With a US$50 billion order book and major backing from the Volkswagen Group, it sought to compete with gigafactory projects from major American, Chinese, and South Korean suppliers. It has, however, failed to meet expectations. In March 2024, Scania’s Chief Executive Officer (CEO) blamed Northvolt’s slow ramp up for thousands of missed truck deliveries, and in June, Northvolt lost its US$2 billion contract with BMW due to delivery delays. Due to disquiet among its key backers and losses ramping up to US$1.2 billion in 2023, Northvolt was forced to cut back.
Overambition Leads to Underperformance
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IMPACT
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Building a gigafactory is no easy task for any company. Batteries must be produced by skilled workers using specialist equipment in a controlled environment, with high standards for quality and safety. These challenges are intensified for an inexperienced startup launching a gigafactory in a region with no lithium-ion battery industry. Northvolt already had its work cut out for it on this basis, competing with mature producers such as CATL, SK on, LG Energy Solution (ES), and Samsung SDI. The Swedish producer, however, went even further than this and set out to become one of the world’s best battery manufacturers.
As well as producing modules and cells, Northvolt aimed to:
- Design cells in-house customized to partners’ requirements
- Develop sodium-ion cells with market-leading energy density for energy storage
- Develop lithium-metal cells for electric aviation
- Produce cathode active materials internally
- Produce the world’s greenest battery
While splitting its resources across ambitious R&D, vertical integration, and sustainability targets, Northvolt failed to meet is delivery targets. Northvolt Ett is reportedly 2 years behind schedule and producing well below 1 GWh of batteries annually. Original Equipment Manufacturers (OEMs) have limited patience for suppliers that can’t fulfill their obligations, making Northvolt’s cutbacks a logical step to protect its core business and ensure its order book does not shrink further. Even after scaling back, however, it is still trying to build three entirely new gigafactories without having scaled up its first. Further bumps in the road ahead seem likely.
Quality, Scale, and Delivery
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RECOMMENDATIONS
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Other than Northvolt, there are a handful of serious gigafactory projects in Europe that are truly European, and most are struggling:
- FREYR: The Norwegian battery manufacturer has halted construction on its Giga Arctic project and is instead moving to the United States to chase subsidy money.
- Automotive Cells Company (ACC): The TotalEnergies, Stellantis, and Mercedes-Benz joint venture has stopped work at two of its three planned factories citing faltering Electric Vehicle (EV) demand and a potential pivot to Lithium Iron Phosphate (LFP) cells; Stellantis and Mercedes-Benz are set to rely on Chinese supplier CATL for their European EVs.
- Italvolt: The gigafactory startup is giving up on Italy and moving to the United Arab Emirates (UAE), rebranded as Statevolt.
- PowerCo: Volkswagen’s battery unit is stalling its plans for an Eastern European gigafactory and will launch its German plant in 2025 at half capacity.
- Morrow: The Norwegian project is supported by energy utility Å Energi, ABB, and Siemens, and has officially inaugurated its pilot line. It has publicly announced offtake deals, but none with major customers.
- Verkor: The French company now appears to be the healthiest battery startup in Europe as Northvolt reassess its position. It has raised over €2 billion in capital from infrastructure investors, state subsidies, and loans to build its 16 GWh plant, and has secured a crucial partnership with Renault to supply it with 12 GWh annually.
Northvolt’s troubles are a reminder to focus on the key criteria for OEMs. Cells must meet quality expectations, be built at the scale needed to support vehicle production, and be delivered on time. This is the bare minimum standard that must be achieved to run a commercially viable gigafactory and beat experienced competitors to secure contracts with OEMs. This is where Northvolt failed, and where all battery manufacturers setting up facilities in Europe must succeed.
