Swedish EV battery maker Northvolt has agreed to sell its stake in Novo Energy, its joint venture with Volvo Cars, as part of a broader effort to streamline operations and explore new opportunities in North America. The financial terms of the deal remain undisclosed, and the transaction is subject to approval by a U.S. bankruptcy court.

Northvolt’s Strategic Shift Amid Financial Challenges

Northvolt, which has been under U.S. bankruptcy protection, halted funding for most of its joint ventures in 2024 to sustain its core battery cell production business. This decision led Volvo to declare Northvolt in breach of contract in October, prompting the automaker to acquire full control of Novo Energy.

The deal marks another step in Northvolt’s cost-cutting strategy, which has included divesting projects in Poland and Norway to prioritize its main battery plant in northern Sweden. Despite its ambitions to build gigafactories in Germany and Canada, the company has faced delays and funding challenges. With its cash reserves expected to run dry in February, Northvolt is actively seeking new investors.

Formed in 2021, Novo Energy was envisioned as Europe’s best hope for a domestic EV battery powerhouse, with plans to build a dedicated battery factory in Gothenburg, Sweden. However, amid financial difficulties, Volvo announced in October that it would need a new partner to keep the factory’s 2026 production start on track. The automaker has not provided further updates on its search.

In January, Novo implemented cost-cutting measures, including a 30% reduction in staff. Despite the changes, a Novo spokesperson acknowledged Northvolt’s vital role in the venture’s progress:

“Northvolt’s expertise has been instrumental in Novo’s development. Moving forward, we will work with Volvo Cars to evaluate a future technological partner for our gigafactory,” the spokesperson said.

Northvolt Eyes North American Market Amid Quality Concerns

Northvolt has struggled with production challenges and quality issues, leading BMW to cancel a €2 billion ($2.08 billion) contract in 2023. These setbacks have raised concerns among investors about Northvolt’s ability to fulfill its commitments.

While Volvo’s acquisition of Novo means Northvolt will lose future battery orders from the automaker, the companies have agreed to explore supply opportunities in North America.

“The framework agreement with Volvo Cars underscores continued market interest in Northvolt. This opens up new possibilities for supply at our upcoming Northvolt Six facility in Montreal,” a Northvolt spokesperson stated.

As Northvolt shifts its focus beyond Europe, its next steps will determine whether it can overcome financial struggles and regain momentum in the global EV battery race.