It was supposed to be a symbol of the Green Deal, but now the Swedish company is on the brink of collapse
Symbol of the Green Deal, the Swedish company Northvolt, currently must lay off approximately a quarter of its employees. Its poor financial results now indicate that the hopes once associated with a successful Green Deal are not very far from collapse.
The Swedish company Northvolt, once a symbol of hope for the European Green Deal, now finds itself on the brink of collapse, similar to other European suppliers. The company, which was supposed to be a key player in the field of electric vehicle batteries, has been forced to reduce its workforce by more than 20%, yet it continues to struggle with insufficient investments and slow-growing demand for electric vehicles in Europe.
Last year, according to its financial results, Northvolt spent more on wages and social security than it was able to earn in total revenues. This has led to serious financial difficulties this year. The company is now faced with the need to lay off about a quarter of its staff, which represents 1,600 employees out of the original 7,000. The layoffs will primarily affect the plants in Skellefteå in northern Sweden, where the company has been trying to expand its production, and the research center in Västerås.
In addition to the layoffs, Northvolt has also suspended the so-called gigafactory project in Borlänge. This was supposed to be one of the main factories that would allow battery production with rapidly growing demand. However, the current situation does not permit the company to build the factory as there is not as much demand for its batteries as was expected.
A key turning point for Northvolt was the canceled order for batteries from car manufacturer BMW worth 2 billion euros. German BMW withdrew from the agreement due to delivery delays and quality issues, which prevented Northvolt from fulfilling its commitments to the customer. This order was one of Northvolt's main revenue pillars, and its cancellation contributed to the company's financial decline. Besides BMW, Northvolt also manufactures its batteries for the Volkswagen Group. However, it is unclear how this will develop given Northvolt's production issues.
Currently, battery production exceeds demand, thus intensifying the competitive environment. Smaller European manufacturers like Swedish Northvolt find it hard to compete. Established manufacturers from China are typically able to offer significantly better conditions in terms of both price and quality.
An additional complication is that Volkswagen and other major Northvolt shareholders—such as the investment bank Goldman Sachs—have not announced whether they are willing to inject more financial resources to save the company. The Swedish government has also distanced itself from any direct support, with Prime Minister Ulf Kristersson stating that state capital will not be used to rescue Northvolt. The German government, which has already provided support for the construction of the plant in Heide, is currently negotiating with the company about possible further aid. However, any support would need to be approved by the European Union.
Northvolt is an example of an ambitious European project that was meant to play a key role in transforming the automotive industry towards green technologies. However, the slowdown in demand for electric vehicles, financial problems, and production hurdles raise questions about its future and the ability of European companies to compete with Asian players.
The chances of saving the company now lie in the potential introduction of new import tariffs on Chinese batteries or other regulatory measures from the European Union. However, this has already proven to be very problematic, as evidenced by the example of tariffs on Chinese electric vehicles introduced earlier this summer.
