Northvolt Files For Bankruptcy Amid EV Market Slowdown

Swedish battery producer Northvolt announced bankruptcy, a significant blow to Europe's efforts to create a homegrown electric vehicle (EV) battery behemoth. Established in 2016, Northvolt was formed with an aim to create the "world's greenest battery" through emphasis on sustainability, zero carbon footprint, ethical raw material sourcing, and recycling. The firm raised over $14 billion in capital to build out its Northern Sweden-based lithium-ion battery gigafactory and establish a battery recycling facility over the years. Although it had ambitious plans and robust financial support from top investors such as Volkswagen and Goldman Sachs, Northvolt fell victim to a mix of industry tailwinds, internal challenges, and economic uncertainty.

Volkswagen, which held a 21% stake in Northvolt, and Goldman Sachs, with a 19% share, had already significantly written down the value of their investments last year, reflecting the challenges the company faced. Northvolt formed a joint venture with Volvo in 2021 to build a gigafactory in Europe, hoping for an output capacity of as much as 50 gigawatt hours (GWh) per year, with production scheduled to start in 2026. But Volvo took full control of the joint venture, called NOVO Energy, earlier this year, a change in strategy that made Northvolt's future uncertain.

The bankruptcy occurs as the European EV market is slowing down with demand dropping below initial expectations. In a recent study, S&P Global cut the 2025 EU battery-electric vehicle (BEV) market share forecast to 21% from an initial forecast of 27%. The waning demand has prompted European carmakers to modify their electrification plans. Volvo, for example, recently dropped its original target of going all-electric by 2030. Instead, the company updated its target, hoping for 90% to 100% of its worldwide sales to be made up of electrified vehicles, both fully electric and plug-in hybrids. Volvo had accounted for the change in many ways, including slower-than-projected growth of EV charging points, government withdrawal of incentives in some markets, and more uncertainty related to fresh tariffs on EVs in various countries.

Northvolt too was impacted by multiple financial and operating setbacks that spelled doom for it. Capital expenses on the rise, supply chain troubles, and geopolitical tensions led the company into challenging times and the inability to hold onto ambitious plans for growth. Also, internal conflicts, especially in ramping up production, further plagued its advance. BMW last year canceled a €2 billion battery supply deal with Northvolt, citing production delays and doubts over the company's capacity to fulfill delivery obligations. BMW instead sourced its EV batteries from Samsung SDI. The leadership crisis at Northvolt also contributed to its woes, with its chairman, Jim Hagemann Snabe, resigning on health grounds in early 2023.

In a statement declaring bankruptcy, Northvolt Interim Chairman Tom Johnstone accepted the seriousness of the situation and was disappointed that the company was facing such an issue. "This is a very tough day for all of us at Northvolt," he stated. "We aimed to create something truly remarkable—to change the battery, EV, and broader European industry for real and speed up the transition to a green and sustainable future.

In spite of the setback, Johnstone emphasized the need for a European battery industry and for long-term engagement by all actors. "To me personally, it is still important that Europe has a local battery industry, but it's a marathon building such an industry. It takes patience and long-term engagement on the part of all stakeholders."

Northvolt's failure casts doubt on the feasibility of large-scale battery production in Europe, especially when international competition is rising. Chinese battery producers like CATL and BYD have persisted in leading the market due to lower costs of production and aggressive government backing. American businesses have also been granted huge financial support through programs such as the U.S. Inflation Reduction Act, which offers huge incentives for local battery manufacturing.

Northvolt's bankruptcy is a cautionary note regarding the pitfalls of expanding a battery production business in an emerging industry. As much as demand for EVs is likely to increase in the long run, short-term volatility in the market, the expensive cost of production, and the disruption in the supply chain have discouraged new entrants from setting up shop. The collapse of the company shows the wider pitfalls for European producers in competing against established global battery providers.

The future of Northvolt's assets, such as its gigafactory and recycling plants, cannot be told. Whether another firm will come in to take over its operations or the bankruptcy will lead to the total disbanding of its projects is uncertain. But the requirement for a sustainable and self-reliant European battery supply chain is still crucial, and the experience of other downfallen Northvolt ventures may influence the plans of forthcoming battery initiatives in the region.