Northvolt, a Swedish EV battery manufacturer, is grappling with significant challenges, including operational delays and order cancellations, notably from BMW. Strategic missteps, such as overextending contracts and production bottlenecks, have hindered growth. The company faces increasing competition from Chinese firms and issues with machinery reliability. Despite backing from major investors and plans to downsize, including job cuts and halting its cathode factory, Northvolt’s future remains uncertain, especially after the recent CEO resignation.
The Challenges Faced by Northvolt in the Electric Vehicle Battery Market
The electric vehicle (EV) sector is evolving rapidly, yet the battery manufacturing aspect is crucial for its sustained growth. Among the players in this field is Northvolt, a Swedish company established in 2015, which opened its first factory in Sweden in 2021. However, the path has been riddled with obstacles.
Bankruptcy Fears and Strategic Missteps
Despite the factory’s inauguration, it has not achieved full operational capacity, leading to significant delays and several order cancellations, particularly from BMW. These challenges have forced Northvolt into protective proceedings, hoping to avert bankruptcy, a situation reminiscent of Fisker’s past struggles. The company is attempting to stabilize its situation while still collaborating with Scania, the heavy truck manufacturer.
Recent reports highlight a series of strategic errors that have contributed to Northvolt’s troubles, with one major misstep being the overextension of contracts. A contract with Volkswagen, for instance, encompassed five different orders, complicating production. As noted by industry experts, “a Scania truck does not require the same batteries as a Porsche or Audi,” which means Northvolt needs to produce six distinct battery types but operates with only two pilot lines. This mismatch has created a production bottleneck, as adapting the lines for different products can take up to two weeks, with customer feedback potentially taking months.
Such issues hinder Northvolt’s ability to scale up production, essential for competing against Chinese firms like CATL and BYD. Furthermore, there are growing concerns regarding the reliability of machinery supplied by Wuxi Lead, a Chinese company known for its complex equipment that often requires on-site specialists for adjustments, leading to further delays.
As the former engineer explains, modifying settings can halt the entire production line, leading to substantial downtime. The language barrier with Chinese experts, who often do not speak English, compounds this issue, necessitating the use of translation tools in a challenging operational environment.
In light of these setbacks, BMW has withdrawn its support after investing over 2.5 billion euros. Nevertheless, Northvolt still has backing from several key investors, including Volkswagen and Goldman Sachs, which hold significant stakes in the company. Northvolt specializes in NMC (nickel-manganese-cobalt) batteries, even as many manufacturers pivot towards LFP (lithium-iron-phosphate) chemistry, creating additional strain on the company.
With plans to cut 1,600 jobs and halt the construction of its cathode factory, Northvolt aims to focus on its assembly sites in Canada and Germany. While the company still has a chance to rebound—similar to Tesla’s gigafactory, which initially discarded a large portion of its production—the road ahead is fraught with challenges, especially following the recent resignation of its CEO.