2024-11-25 13:59:00
“Northvolt will continue to exist in some form,” was the most optimistic conclusion of director Peter Carlsson in an interview with the Swedish financial newspaper, after much stammering and stuttering. Today’s Industry. The day later, on November 22, news arrived that he had resigned. “As director, I must take responsibility for the fact that we ended up in this situation,” he stated.
The hyped and once promising maker of lithium-ion batteries for electric cars in northern Sweden is struggling to stay afloat. Analysts continually doubt whether Northvolt will make it to the end of the day. Employees – who may or may not have been dismissed – wonder whether they will still be paid.
What went wrong?
When we visited in February this year, the municipality of Skellefteå, barely a hundred kilometers from the Arctic Circle, was covered in snow and darkness. It was once a mining town, it has 30,000 inhabitants and is sometimes called the city of gold; the gold city, alluding to the local iron ore mine that contains gold veins.
‘No one doubted his ability. He would come to Europe and repeat Tesla’s success story here’
Now the emphasis is on green instead of gold. The region is presented as ‘the epicenter of the European green transition’. The absolute highlight is the Northvolt factory, or rather call it a Northvolt village: on an industrial estate just outside the city, in the middle of powdery pine forests, lies a collection of immense white block boxes – factory buildings – flanked by rows and rows of containers, the temporary homes for the factory employees.
It had to happen in this mega factory: the tens of thousands of lithium-ion batteries that would soon roll off the assembly line at Northvolt were the answer to the Chinese dominance of the battery industry. The company would contribute to both the climate transition – in the form of the electrification of the transport sector – and Europe’s strategic autonomy.
The location, more or less at the end of the world, made sense: the factory has abundant, cheap and renewable hydropower within easy reach.
Rock star status
Public and private investors eagerly responded. In the eight years since the company was founded, it managed to raise $15 billion – according to the Financial Times the largest amount ever for a non-listed start-up in Europe. Car manufacturers such as Volvo and Volkswagen joined forces with the battery developer.
It helped that co-founder and CEO Peter Carlsson came from US car giant Tesla and, says Christian Sandström, associate professor at Jönköping International Business School and columnist for the financial magazine The business world‘had the status of a rock star’. “Nobody doubted his abilities. He would come to Europe and repeat Tesla’s success story here.”
But the factory’s future hangs in the balance. Not a day goes by in Sweden without dreary Northvolt news: 1,600 employees losing their jobs, the closure of the container village and the staff canteen, a death on the work floor and three unexplained deaths outside working hours. The Swedish labor inspectorate that finds a dozen workers without a work permit. The bankruptcy of subsidiary Northvolt Ett Expansion. The investment manager of Volkswagen, Northvolt’s largest shareholder, is withdrawing from the board. And, just before the weekend, the resignation of ‘rock star’ Carlsson.
Not completely out of the blue
How did the company go from promise to ailing? The official answer is that demand for electric cars is stagnating. But that’s only part of the story. The crisis at Northvolt became acute when BMW withdrew an order worth 2 billion euros this year. That decision did not come entirely out of the blue: the Swedish battery maker was unable to deliver the batteries on time. The car manufacturer decided to outsource the job to the South Korean Samsung.
“In Europe we are late to the party,” says Björn Sandén, professor of environmental systems analysis at Chalmers University in Gothenburg. “China is miles ahead of us in terms of technology and production. That doesn’t just affect Northvolt, it affects the entire European battery industry.”
In other words: a Swedish newcomer has little chance in the free trade system. Especially, says Sandén, now that China is producing a surplus of batteries that are being sold at bargain prices. It’s almost impossible to compete with that.
“Northvolt produces little and what it produces is of substandard quality,” says Christian Sandström. The associate professor has been closely following developments at the battery factory for years and spoke to company employees. He says Northvolt has had difficulty retaining skilled staff from the start – not least because of its remote location. “The company relies on international workers from many different countries. From what I have heard, they often have more responsibilities than their experience warrants.” The culture, he says, is one of: We’re doing something great here. “But there seems to be a neglect of quality and production.”
Hundreds of Chinese guest workers
In addition, rumors are circulating that the factory uses Chinese machinery and hundreds of Chinese guest workers. According to Sandström, a senior engineer confirmed that information. “The machines were new in China twenty years ago. It may explain the quality and safety problems. Moreover, it means that Northvolt is not living up to its implicit agreement – that of increased strategic autonomy vis-à-vis China. The entire location is dependent on Chinese equipment.”
“The company has more than five billion euros in debt, is making huge losses and is failing to ramp up production.”
The initial intention was to expand the Skellefteå plant to 60 gigawatt hours (GWh) – one GWh provides enough batteries for 17,000 cars – but that plan was canceled at the end of September. Former Northvolt director Peter Carlsson stated this summer that the company aimed to reach a production level of one GWh per year by the end of this year. Next year this would be expanded to ‘a handful’ of GWh and the company should be profitable by 2026.
The loss-making company is currently mainly trying to avert bankruptcy by suspending or divesting large parts of its business operations. The research and development facility in the United States has been closed. Future factories in Canada, Germany and Sweden will – at best – be delayed, according to spokespeople.
Matryoshka of public funds
Sandström thinks that Northvolt could go under at any moment. The Swedish state has already stated that it will not save the battery maker from collapse under any circumstances. “The company has more than five billion euros in debt, is making huge losses and is failing to ramp up production,” he said. “New investments only go to creditors. The only way to solve this is bankruptcy.”
According to him, it does not bode well for the legion of green companies that have established themselves in northern Sweden in recent years. “Promising companies like Northvolt are supported by a matryoshka in public resources from the municipality, the government and the European Union. No risk is too great if someone else pays the bill. Handing out cheap government money to capitalists who say they will save the world in a place where there is a shortage of skilled labor, maybe it wasn’t such a good idea after all.”
In the context of our capitalist economy, “there is nothing strange about some companies making it and others not,” Sandén notes. “But the stakes are high. In geopolitical relations, Europe has a problem if it cannot supply batteries itself.”
The activities must be saved
The professor believes that we are ready for a new paradigm. “We had the era of the New Deal and state aid, then we had a neoliberal model and now we are in a transition phase. We are moving towards the sustainable transition paradigm in which governments once again have an important role to play.”
He emphatically calls for ‘expert state intervention’ so that the pace of the climate transition can be accelerated so that we ‘have balanced supply chains worldwide’. That does not mean, Sandén believes, that the state should rescue every floundering company. “States and the EU as a whole must invest in the development of key sectors – not necessarily in individual companies. Not Northvolt, but the activities must be saved.”
Also read:
Former climate activist now advocates more mining and factories in Europe. Why?
Leuven researcher Peter Tom Jones became known as a climate activist, but now advocates more mining on his own soil and protection of European industry. Green growth must also be social.
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