European Manufacturing Challenges: Northvolt Files for Bankruptcy

Northvolt, a Stockholm-headquartered battery manufacturer employing 6,600 staff, filed for U.S. Chapter 11 bankruptcy on November 21, with the goal to complete restructuring in 1Q 2025 and accessing additional financing. At the time of filing, the company only had US$30 million available, sustaining only a week’s worth of operations, while also fielding debts of around US$5.8 billion. Significant investors included Goldman Sachs, Volkswagen, and a range of government bodies (European Union (EU), Germany, and Sweden), with the company raising over US$15 billion in total. The company was seen as a key component, alongside FREYR, Verkor, and ACC, for building a reliable base of battery manufacturing as a long-term competitive alternative to Chinese market heavyweights such as BYD, CATL, and CALB. The bankruptcy serves as the latest blow to the competitive future of European manufacturing (further addressed in ABI Insight “ADNOC Is Closing in on Its Acquisition of Covestro, Begging the Question, Can European Manufacturing Thrive without Outside Investment to Fund Digital Transformation?”).

From a technological adoption stance, Northvolt looked like a company primed for success. The long-term growth opportunities for Electric Vehicles (EVs) and associated battery manufacturing are robust, with ABI Research forecasting the total EV passenger car sales volume to reach 104 billion units per year globally by 2035, and the company was adopting leading solutions to create true Industry 4.0 production (see MD-EV-103 for more information).

The technology solution lineup looks good, leveraging ABB’s Distributed Control System (DCS), ABB Ability System 800xA, and Manufacturing Operations Management (MOM) software; Microsoft’s Enterprise Resource Planning (ERP), Dynamics 365; and a plethora of Siemens’ offerings, including Teamcenter (Product Lifecycle Management (PLM)), NX (Computer-Aided Design (CAD)), Simcenter (Simulation), and SIMATIC (control system). This underpinned the company’s creation of manufacturing digital twins for production processes, built around Siemens Digital Industries’ Closed-Loop Manufacturing (CLM) concept, creating a digital thread across PLM, ERP, and Manufacturing Execution System (MES) to feed back into the twin.

While manufacturing success cannot simply be brought about by being in the right sector and utilizing digital  solutions, Northvolt’s case does call into question whether optimization and cost reduction through technology adoption are enough to combat the industry influences of government support and geopolitics. It is becoming clear that without notable government support of domestic and regional industries, manufacturers will struggle, especially on the global scale. Even with the best production process using the latest and greatest Industry 4.0 solutions, companies will still falter in the face of protectionist government policies. The Chinese government continues to consistently empower its local industries with access to easy credit and heavy encouragement of the purchase of domestic products, enabling manufacturers to produce at incredibly competitive cost. The United States is looking to increasingly grow its protectionist stance, building on the favorable CHIPS and Science Act under the Biden Administration, which offered federal incentives for domestic semiconductor manufacturing and Research and Development (R&D), with Trump’s team championing a wide range of potential tariffs, particularly targeted at the highly competitive Chinese market. Furthermore, the EU has also tariffed Chinese-made EVs in an effort to support its struggling domestic market against the likes of BYD, Geely, and Great Wall Motor.

Both manufacturers and technology vendors should look to learn from the lesson provided by Northvolt. Despite the adoption of a wide range of Industry 4.0 solutions, this was not enough to outweigh the company’s over-aggressive expansion, failure to competitively match Chinese rivals, and a sluggish European car market. Investments in new production sites and technology solutions will not guarantee success if on-the-ground production is not meaningfully impacted and effectively scaled.

Looking forward, effective geo-strategic planning and risk management are becoming the most critical elements required for manufacturing success. Manufacturers should make sure to focus capital toward taking advantage of upcoming favorable government policies, which could be more lucrative than investing in the latest and greatest automation solution upgrade or adding additional production capacity to make a company more competitive. Geopolitics and technology should be accounted for hand-in-hand, and governments and regional manufacturing champions need to work hand-in-glove going forward, going beyond simply investing massive sums of money.