"The absurd and disastrous collapse of the European battery king."

Author | FeiXue

Editor | Lu Xucheng

In just eight years, Nordic battery manufacturer Northvolt, once heralded as the 'rising star' of the European battery industry, squandered nearly $14 billion (approximately RMB 102 billion). However, due to a broken capital chain, the company ultimately filed for bankruptcy protection on November 21, 2024, becoming a cautionary tale in the new energy industry.

In 2016, former Tesla executive Peter Carlsson led a team to establish Northvolt, aiming to leverage Europe's abundant renewable energy resources to break free from Asian battery giants and provide an autonomous and controllable battery supply chain for the electric vehicle industry.

Northvolt's journey, from proclaiming to 'transform the European battery landscape' to sinking into a financial crisis, starkly illustrates the vast disparity between dreams and reality.

At its inception, Northvolt made a grand announcement that it would produce batteries using green energy (such as wind and hydropower) and aimed to create a 'green revolution' in battery production.

This ambitious vision garnered strong support from the European Union and the Swedish government, making it a symbol of the 'European battery dream.' However, as the project progressed, significant technological flaws began to surface.

Despite promising to use eco-friendly energy for battery production, Northvolt's battery production technology failed to achieve rapid breakthroughs, resulting in production efficiency far below expectations.

Concurrently, the construction of manufacturing bases faced continuous delays. The original plan was to commence operations at the Skellefteå plant in northern Sweden in 2021, but the actual commissioning date lagged significantly, and production capacity fell far short of the initial target. Data reveals that in 2023, the total production at the Skellefteå plant amounted to only 0.05% of its theoretical capacity, greatly disappointing the market and investors.

Initially, Northvolt's plan was confined to building a single battery factory in the Swedish town of Skellefteå. However, as funds poured in and ambitions soared, Northvolt accelerated its expansion plans. The construction of a second and third plant was successively placed on the agenda, with Germany, Canada, Poland, and other locations becoming part of its global footprint. Beyond battery manufacturing, Northvolt also ventured into energy storage facilities, production, recycling, and other domains.

However, the Skellefteå plant, which had been operational for several years, failed to shoulder the heavy responsibility of the company's core production, instead becoming the first sign of Northvolt's bubble bursting.

In June 2024, BMW, a major client, ultimately terminated a multibillion-dollar contract with Northvolt due to delayed battery deliveries and substandard quality, dealing a severe blow to the company.

In reality, beneath Northvolt's seemingly imaginative business plans lay hidden technological bottlenecks and management chaos, compounded by excessively inflated corporate and capital ambitions, leading to this entrepreneurial disaster.

During its financing and expansion phase, Northvolt rapidly expanded, planning to establish multiple battery manufacturing plants and deploy a global market strategy.

However, overly optimistic expansion plans and capital consumption exacerbated the company's financial pressures. More critically, Northvolt lacked an effective management system, and founder Peter Carlsson and his core team failed to adjust strategies promptly, leaving the company unable to respond swiftly to technological challenges.

Furthermore, issues such as technology and supply chain stability persisted, leading to significant financial losses. By the time of bankruptcy, the company had only $30 million in cash on hand, signaling a complete breakdown in its capital chain.

"Dream Creation"

In 2016, Peter Carlsson returned to Sweden and founded Northvolt, harboring a dream of revolutionizing the European electric vehicle industry.

As a former Tesla executive, Carlsson's entrepreneurial goal was clear: to leverage Sweden's abundant renewable energy resources and innovative spirit to establish a green and sustainable battery production base, providing stable and reliable batteries for the European electric vehicle industry.

This dream was ambitious and timely. At that juncture, Europe was at a critical point in its energy transition, with climate change, energy security, and environmental policies making green energy and electric vehicles the linchpin of economic recovery.

Northvolt's emergence coincided with this trend, and Carlsson's vision seemed impeccable: relying on wind and hydropower to produce batteries would not only help Europe break free from its dependence on Asian battery manufacturers but also provide environmentally friendly and sustainable battery solutions.

The dream seemed tantalizingly close to reality. The plan quickly garnered support from capital markets and governments. In 2017, Northvolt announced a strategic partnership with Volkswagen and received funding from institutions such as Goldman Sachs, the Swedish National Investment Company, and Nordea Bank.

These funds were utilized not only for establishing production facilities but also for developing more efficient and environmentally friendly battery technology. Carlsson's ambition was also reflected in the company's vision: by constructing a world-class battery production base, Northvolt aimed to not only supply batteries to the European market but also become a significant player in the global battery market.

Notably, Carlsson's strategy received positive support from the European government. The European Union's 'Green Deal' and national policies promoting the electric vehicle industry fueled Northvolt's rapid ascent.

The Swedish government pledged subsidies and tax breaks, further accelerating the company's expansion. According to public information, Northvolt signed an agreement with the Swedish government and the local city of Skellefteå in 2019 to construct a battery factory spanning nearly 500,000 square meters. This factory was highly anticipated and expected to become a 'leading enterprise' in European electric vehicle battery production.

As a result, Northvolt garnered considerable attention in the European market. By the beginning of this year, it had secured orders worth over $55 billion from clients such as BMW, Volvo Cars, and the Volkswagen Group. However, tragedy struck in June this year when, as previously mentioned, due to insufficient production capacity and substandard quality control, BMW terminated its cooperation with Northvolt and chose South Korean battery manufacturer Samsung SDI instead.

Subsequently, Northvolt announced layoffs and cost-cutting measures while seeking new financing to weather the storm.

However, behind all this, Carlsson and his team did not fully anticipate the enormous technological and managerial challenges. Although Northvolt's business model was in sync with the rapid development of global electric vehicles, in actual operations, its overly idealistic strategy soon exposed fatal flaws.

Despite ambitious plans and massive funding support, Northvolt still failed to avert the management chaos and technological challenges brought about by rapid expansion.

Meanwhile, technological advancements, production scales, and cost control by Asian battery giants such as CATL and BYD put Northvolt at a disadvantage in competition. Ultimately, Northvolt's battery production did not meet expected levels and failed to swiftly satisfy market demand, leading to enormous financial pressures.

This 'dream creation' did not yield the glorious results Carlsson and investors had anticipated but gradually revealed irreparable cracks within the company. These cracks foretold the subsequent disaster.

"Absurdity"

Northvolt aimed not only to supply batteries to the European electric vehicle industry but also to symbolize Europe's break from dependence on Asian battery manufacturers.

Carlsson relied too heavily on the 'politically correct' label, overlooking the core technological competitiveness of the battery industry. In his public statements, environmental protection, wind power, and hydropower were repeatedly emphasized, as if the key to success rested solely on the blessing of clean energy.

He once stated, "We must not only produce batteries but also green batteries," emphasizing the use of renewable energy (wind and hydropower) to reduce the carbon footprint during production, an idea that indeed resonated with the growing demand for green environmental protection in the European market at that time.

However, this idealistic 'green revolution' failed to consider the complexity and stringent technical requirements of battery manufacturing. The reality is that the success of battery manufacturing is not solely determined by eco-friendly labels—technological breakthroughs, capacity enhancement, and production efficiency are paramount.

Carlsson placed too much emphasis on environmental protection and the 'green revolution' but overlooked how to meet market demands through innovative technology and reliable production capacity in the fiercely competitive market.

Even though Northvolt used renewable energy sources such as wind and hydropower to produce batteries, without breakthroughs in core technology and production efficiency, these batteries could not compete with giants like CATL and BYD.

In fact, Carlsson failed to effectively overcome the bottlenecks in technological innovation and production capacity. Northvolt did not achieve significant breakthroughs in battery energy density, lifespan, and charging speed.

In terms of production, Northvolt's factory construction progressed slowly, failing to rapidly increase production capacity, leading to production bottlenecks. Initially, the company promised to commence production in 2021, but the actual production date was repeatedly delayed, and even in 2023, Northvolt's production volume was still far below expectations.

Simultaneously, insufficient technological breakthroughs resulted in high battery production costs, making Northvolt less competitive against Asian battery manufacturers from China and South Korea.

The actual situation underscores that even with the support of green energy, the battery industry remains technology-intensive, and success is far from being easily achieved by relying solely on the 'green' label.

These contradictions ultimately reflected in Northvolt's financial situation. Although the company received massive investments from governments and capital markets, it failed to achieve the expected profits through technological advancements and capacity expansion, instead plunging into continuous losses.

The root cause of all this was Carlsson's overreliance on the 'green revolution' and neglect of the enormous challenges posed by technological innovation and market realities.

"Disaster"

Northvolt's 'disaster' did not occur overnight but was a gradually inflating bubble that ultimately burst due to resource depletion, technological challenges, and management errors.

Although Peter Carlsson's original intention was to establish the company as a leader in the European battery industry, over time, this once promising dream ultimately degenerated into an absurd catastrophe.

From initial overspending to the inability to overcome technological constraints, Northvolt's failure was not instantaneous but accumulated over time due to issues like expansion and inflation, ultimately leading to collapse. Carlsson once confidently stated, "Northvolt's technology and philosophy will bring revolutionary breakthroughs to the battery industry."

However, Northvolt overly relied on the 'green revolution' label while neglecting the core technological innovations required for battery production. Especially in terms of battery charging and discharging efficiency and battery stability, Northvolt's technology could not compete with its rivals.

In contrast, CATL made significant strides in addressing battery swelling issues years ago by optimizing battery materials and battery management systems (BMS), successfully enhancing battery safety and stability. Similarly, BYD defeated Japanese battery manufacturers with its self-developed batteries in an old workshop in Shenzhen, rapidly capturing the market with its low-cost and high-performance advantages.

In fact, weak European electric vehicle sales are also a macro reason for startups like Northvolt to fall into difficulties.

Although the European electric vehicle market exhibited robust growth for several years, electric vehicle sales growth began to slow down in 2023. According to data from the European Automobile Manufacturers Association (ACEA), electric vehicle (EV) sales in Europe grew by only 10% in 2023, a significant drop from the approximately 20% growth rate in 2022. In Q4 2023, electric vehicle sales growth in Europe approached 0%, indicating market weakness.

These data indicate that the market demand for electric vehicles in Europe did not continue to grow at the previously anticipated rates. This not only impacted battery manufacturers' orders but also exposed companies like Northvolt, which rely on rapid expansion, to the risk of a broken capital chain.

Moreover, during the relentless pursuit of market share and capacity expansion, Northvolt's senior management team failed to effectively recognize this reality.

Massive capital investments failed to translate into actual production capacity, and technological lags further eroded Northvolt's competitiveness in the battery market.

With the bankruptcy protection filing, Northvolt's dream shattered.

Once considered the future hope of the European battery industry, it ultimately became a tragic 'dream farce' in the new energy sector.

From its grandiose beginnings to its current dire straits, Northvolt's downfall not only highlights the clash between capital aspirations and dreams but also unmasks profound flaws in the company's technology and management. This serves as a stark lesson for the European battery industry.

"Epilogue"

Northvolt's demise can be aptly described as a quintessential example of a 'folly of dreams'.

Its initial ambitions, overly reliant on the external sheen of 'political correctness' and the reckless expansion of the enterprise, ultimately dissolved into an unfulfilled bubble.

When confronted with the ambitious vision of the European battery industry, Peter Carlsson and his team overlooked the fundamental challenges of technological breakthroughs, market adaptability, and corporate governance.

Fuelled by capital, Northvolt ballooned rapidly in the short term but was also inexorably hurtled towards its inevitable collapse. Despite the influx of funds, Northvolt's operational realities fell short of expectations.

In a sense, Northvolt's failure epitomizes Europe's missed opportunities in the new energy race.

The root cause of this saga was a folly of dreams that ultimately crumbled under the weight of capital and reality, dissolving into nothing more than a fleeting bubble.

Northvolt's bankruptcy underscores Europe's reliance on Asian technology in the battery industry, revealing that in the fiercely competitive global battery market, mere policy support and 'green labels' are insufficient to navigate the harsh realities of technological innovation and industrial competition.