Northvolt had big plans, but now it has to revise its plans. The Swedish electric battery manufacturer is preparing to slow down its international development plan, particularly in Quebec. The “young company” must “prove itself” by showing that it is big enough to compete with its Asian rivals, experts believe.
“It’s a fairly young company. In fact, the industry itself is fairly young. So, it’s normal for Northvolt to review its strategy at this stage,” says François Dauphin, CEO of the Institute on Governance.
Michel Magnan, a professor at Concordia University’s School of Management, sees the situation in the same light. “It’s common for a start-up to experience these kinds of difficulties early on,” he notes.
On Tuesday, in an interview with the economic daily Days IndustryNorthvolt’s chief executive Peter Carlsson has admitted that the company’s expansion plans have been “a bit too ambitious”.
They may indeed have rushed their expansion plans a little.
A “strategic review” will be presented in September, he said. The company’s management wants to focus on its gigafactory in Skellefteå, located in northern Sweden, to resolve “delays” in order deliveries.
In late June, German auto giant BMW canceled a $2.15 billion (C$3 billion) order from Northvolt after the contract signed in 2020 failed to be fulfilled on time.
Annual results
“They may have actually rushed a little into their expansion projects. This is reflected quite clearly in the results we are seeing: the level of debt has increased considerably from one year to the next. And revenues are still embryonic,” explains François Dauphin.
In its annual report released Tuesday, Northvolt reported that its debt increased from nearly $3.5 billion as of December 31, 2022 to approximately $5.3 billion as of December 31, 2023 — an increase of more than 51.4% in one year.
Its revenues rose from 107 million to 128 million over the same period (+20%), while its losses widened from 285 million to 1.2 billion dollars (+321%).
“Its various projects require a lot of capital. It must consolidate its activity and first ensure that everything works with its first factory in Sweden,” Mr. Dauphin emphasizes.
According to Professor Michel Magnan, a strategic review of the company is timely. The company “must prove itself” and not “disperse its resources,” he believes.
Opposing winds
“It must also be said that Northvolt is in a very competitive market. There are big competitors in China that produce at a lower cost,” adds Mr. Magnan. “In addition, sales of electric vehicles are stagnant, which weighs on the prospects for growth in demand. This affects the company’s ability to generate cash,” the expert argues.
According to François Dauphin, “we are not at the point of worrying” about the company, even if it “must revise its objectives” given the “current market conditions”.
Last October, the British daily Financial Times reported that Northvolt was planning an IPO in 2024, at a valuation of around US$20 billion, or more than C$27 billion. “In my opinion, those plans are going to be pushed back,” Dauphin said.