Request for protection
On November 21, 2024, privately held Northvolt announced that it had filed for bankruptcy protection from the U.S. Bankruptcy Court under Chapter 11. Such a filing typically involves a reorganization, whereby the petitioning company's business can continue and it is allowed to apply for additional loans. The Swedish manufacturer was forced to take this step after it was unable to secure further capital inflows, even from its largest shareholders, Volkswagen and Goldman Sachs. In the 8 years of its existence, the company has raised more than USD 10 billion in various investments, but its debt has also increased. According to Euronews, this has reached more than USD 5.8 billion. The amount needed to keep the company going is estimated at around USD 245 million. Reuters reported that part of the loan will come out of the pocket of Swedish truck maker Scania, which has said it will lend Northvolt USD 100 million as part of a bankruptcy protection deal. The funds will be used to stabilise the company and support long-term goals, while subsidiaries in Europe and the Americas will continue to operate. Northvolt plans to complete the entire process by next spring. The announcement of the filing also brought a change in the company's leadership, with CEO and founder Peter Carlsson stepping down.
Ambition replaced by failure
In recent months, the company has experienced production problems, resulting in an inability to meet customer demand and internal targets. According to production plans obtained by Reuters, Northvolt has managed to deliver around 20,000 batteries per week since September, well short of the 50,000 weekly target, citing equipment failures, staff inexperience and targets set too high. The company, however, dismissed this information. The September announcement to suspend operations at the Northvolt Ett plant and cut 1 600 jobs as part of cost-cutting measures also failed to improve the company's financial situation. Difficulties also led to the cancellation of a two-billion-dollar contract with Germany's BMW and the move to go public.
European battery industry at risk
Northvolt, with the purposeful slogan "make oil history", was seen as a pioneer, the hope of the Old Continent in the transition to green energy and in the effort to create a competitive environment against Chinese products. Several projects in the sector have been postponed or cancelled this year, while planned battery production capacity has shrunk by 176 GWh by the end of the decade. Chinese companies such as CATL and BYD dominate the European market, thanks to a technological advantage and an efficient supply chain. Without more support and further initiatives, Europe will fall further behind and jeopardise its strategic interest in reducing dependence on foreign suppliers.
Northvolt as the icing on the cake
Meanwhile, the poor situation in the European EV market has been occurring for some time, driven mainly by low demand. This is due to the high price of battery cars, which is often higher than the price of conventional cars with internal combustion engines, despite subsidies. Concerns about low residual value, low range and inadequate charging infrastructure are also added. According to AlixPartners, just over 40 percent of Europeans plan to buy an EV as their next vehicle. This compares to 97 percent in China. Automakers, in turn, face challenges such as an inadequate supply chain and low margins compared to hybrids and gasoline vehicles. Add to this the EU's strict emissions regulations, non-compliance with which will lead to fines. What the local market cannot offer, Chinese carmakers with cheaper options will bring. The EU has opposed this with new tariffs, which it has increased to almost 40 per cent.
Changes in plans
The manufacturers' response to the demand is to change the plans by the end of 2030. Porsche (P911) has relaxed its target of 80 percent electric vehicle sales, depending on market conditions and developments. Mercedes (MBG) has postponed its vision of all-electric vehicle sales to 2035, with a target that EVs and hybrids should account for 50 percent of sales. Bentley has said that hybrids will remain available beyond 2030, and the first electric car from Aston Martin (AML.L) is also yet to be seen. Renault (RNO) has switched from an all-electric model range to a mixed strategy of EVs and petrol cars. While Volkswagen (VOW3) has maintained its target for EVs to account for the majority of sales in Europe in 2030, its battery production plans remain flexible depending on demand.
Help could come in a few years
Europe could get a helping hand in the transition to sustainability from the start-up Cylib, which has begun building Europe's largest battery recycling plant in Dormagen near Düsseldorf. The plant will be operational by 2026 and will recycle up to 30,000 tonnes of batteries a year. According to CNBC, the recycled materials will also be used by companies such as Porsche, which has financially supported the private company. The company's long-term goal is to expand its operations throughout Germany and the rest of Europe.
Recycling challenges
Battery recovery brings with it pitfalls. Although up to 95 per cent of lithium-ion batteries can be recycled, currently only around a "whopping" 5 per cent are recycled. The main obstacle to more efficient treatment is the high costs resulting from the variety and complexity of battery designs, power supplies and sizes from different manufacturers and the need for specialised recycling technology. The lack of methods to evaluate the lifetime of batteries, not to mention the lack of a circular economy that would allow batteries to be reused multiple times, also slows down efforts to recycle efficiently.
Olivia Lacenova, chief analyst at Wonderinterest Trading Ltd.
