The financial collapse of Northvolt has delivered a significant setback to Europe’s efforts to establish a competitive electric vehicle (EV) battery industry. This has sparked discussions about whether the continent needs to take stronger action to attract investment, as European startups struggle to keep pace with dominant Chinese rivals.
Northvolt, long regarded as Europe’s leading hope for EV battery production, filed for U.S. Chapter 11 bankruptcy protection on Thursday after failing to secure additional funding from investors and creditors, including Volkswagen and Goldman Sachs.
A Painful Blow to Europe’s Battery Aspirations
Founded in 2016 with the ambitious motto “make oil history,” the Swedish company has raised over $10 billion in equity, debt, and public financing. Both Volkswagen and Goldman Sachs each own around 20% of its shares. Despite these resources, Northvolt announced on Friday that it needs $1.0-$1.2 billion in new funding to complete its restructuring process by the end of March.
In a bid to stabilize its finances, Northvolt recently downsized its operations and cut jobs. However, it has faced ongoing challenges, including producing high-quality batteries at scale and losing a €2 billion ($2.1 billion) contract with BMW in June.
These struggles cast doubt on Europe’s ability to build a robust domestic battery supply chain. Over the past decade, Northvolt led a wave of European startups investing tens of billions of dollars to support the region’s automakers as they transition from internal combustion engines to EVs.
Falling Behind Global Competitors
Despite these efforts, EV demand has grown more slowly than anticipated, while China has maintained a commanding lead in battery production. According to the International Energy Agency, China controls 85% of global battery cell manufacturing.
Battery production is a complex and delicate process, especially at scale. Northvolt’s difficulties in meeting its own targets and reducing production at its Swedish battery cell plant illustrate the challenges.
“Batteries are incredibly difficult to make, and Northvolt hasn’t met its customers’ supply demands—this is a management issue,” said Andy Palmer, founder of Palmer Automotive. “The Chinese are 10 years ahead of the West in battery technology. That’s a fact.”
Northvolt’s struggles are part of a broader trend. At least eight companies have delayed or canceled EV battery projects in Europe this year, including China’s Svolt and the ACC joint venture between Stellantis and Mercedes-Benz. Benchmark Minerals data indicates that Europe’s battery pipeline capacity for 2030 has dropped by 176 gigawatt-hours in 2024—nearly equivalent to the continent’s entire current installed capacity.
Calls for Strategic Rethinking
Some industry leaders argue that Europe needs to provide stronger support for domestic battery projects to compete with Chinese giants like CATL and BYD.
“Europe must rethink its approach to supporting the battery sector before China takes over the entire value chain,” said James Frith, European head of Volta Energy Technologies.
Northvolt’s $5.8 billion in debts include $313 million owed to the European Investment Bank (EIB). EIB Vice President Thomas Östros emphasized that the bank would protect its interests while monitoring the situation closely.
“Europe has a strategic interest in a domestic battery industry for electric cars, but it’s too early to predict the outcome,” he stated.
A Crossroads for Europe
Sweden’s government has ruled out taking a stake in Northvolt, but the company’s co-founder and outgoing CEO Peter Carlsson expressed concern about Europe losing its competitive edge.
“I’m a little worried Europe is giving up on its dream of competing with China,” Carlsson said. “We’ll regret this in 20 years if we retreat now.”
Carlsson acknowledged that the EV transition faces challenges, including uncertainty from automakers, policymakers, and investors. “It’s not a straight path,” he said. “We’re in a difficult phase where doubts and hesitations are slowing progress.”
As Northvolt fights for survival, the broader question remains: can Europe find the resolve to build its EV battery industry, or will it cede dominance to China?
