Embattled Swedish battery maker Northvolt announced Thursday it would file for bankruptcy in the United States, dealing a blow to Europe's ambitions for homegrown lithium-ion batteries.
The company reportedly opted for Chapter 11 in an effort to restore its financial health. As a result of the filing, co-founder and CEO Peter Carlson has resigned, but will remain as an advisor and director.
“Today marks an important new step for Northvolt and for me personally,” Carlson said in a statement. “Filing for Chapter 11 gives us time to reorganize our company, strengthen our operations while meeting our customer and supplier commitments, and ultimately position ourselves for the long term. Now is a good time to pass it on to the next generation of leaders.”
Northvolt, which has soared for years on the back of strong fundraising and a series of announcements about new facilities, has slumped recently. The company laid off 1,600 employees, about 20% of its workforce, in September and unloaded assets from its ill-fated acquisition of Bay Area battery startup Cuberg in November.
The company has raised $14.26 billion, including a $1.2 billion round in 2023 to expand in North America, according to PitchBook. But that wasn't enough to sustain the cash-strapped operation. The company was said to be burning $100 million a month. When BMW terminated a $2 billion contract in June after Northvolt failed to deliver on time, bankruptcy became all but inevitable.
This isn't the first time a battery manufacturing startup has fallen on hard times – the failure of A123 Systems more than a decade ago stands out as a notable example in the US – but it won't be the last. Manufacturing lithium-ion batteries is extremely difficult and requires deep knowledge of chemistry, production equipment, and quality improvement. Even major companies are plagued by costly problems, sometimes up to $1 billion. Northvolt's bankruptcy is probably more a sign of poor management than of weaker-than-expected EV demand.
Will this be the end for Swedish companies? Not necessarily. Volkswagen, for example, owns part of the company and is making big bets on EVs, which require millions of cells. Moreover, Europe, like other developed countries, was rushing to acquire stakes in battery manufacturing, and Northvolt seemed like its best chance to compete with Asian rivals. Perhaps with some help from one of its rivals through some kind of partnership, it could still survive, but it needs to get itself in order first.