Amid the crushing liquidity crisis currently facing Northvolt, the company’s creditors will meet on Friday to decide on the release of funds necessary for the company’s survival.
Bloomberg notes that currently Northvolt is spending its last cash resources and is fighting to deliver previously ordered batteries to customers. On Monday she announced that is laying off a fifth of its global staff and halting the expansion of its main factory in northern Sweden. And this may not be the end of the bad news, because sales of electric cars are weakening, which means that the demand for batteries is decreasing. Meanwhile, the global battery market is dominated by Chinese rivals. Contemporary Amperex Technology and BYD sell batteries and electric vehicles at unbeatable prices.
“Demand will not be strong enough to meet supply, and Northvolt may be the first casualty of the current market correction,” Fredrik Erixon, director of the Brussels-based European Center for International Political Economy, told Bloomberg.
A spectacular fall
Less than a year ago, Northvolt was a rising star among EV manufacturers. The company wooed investors with a planned initial public offering that would value it at $20 billion. It was also the first beneficiary of the European Union’s green aid – reminds Bloomberg.
Northvolt’s fundraising history/Bloomberg
But so do others in the industry Northvolt was trying to do too much, too fast. One of the sources of the company’s problems was teams that were insufficiently prepared to operate on a large scale. In addition, there were problems with fulfilling orders for customers such as BMW. At one point, the company was also unable to meet delivery deadlines for other customers, such as Scania.
Northvolt also had serious quality problems. The large number of defective cells that could not be used limited the ability to quickly scale up mass production, driving up costs and reducing revenues. Due to the poor quality of the cells, BMW canceled an order worth 2 billion euros in June.
Last year, salaries and social security contributions for employees were more than three times higher than revenues from contracts with customers. The company became cash-strapped less than a year after securing a $5 billion green loan that increased its total debt and equity obligations to more than $13 billion, Bloomberg reports.
This year, another avalanche of bad news hit the company. In May, IPO plans were shelved. In July, the company announced that its operating loss more than tripled to $1.03 billion last yearand revenue increased slightly to $128 million. The company also said it had to delay startup schedules at its four main locations. In August it said it was closing its California research unit, and this month, struggling to save cash, it halted production of cathode materials in Sweden.
How much of the grand plans are left?
Northvolt’s stated goal is global capacity of 230 gigawatt hours by 2030 in its factories, which is sufficient number of batteries to power approximately 3.8 million vehicles. Currently, its only operating facility, Ett, near the Swedish town of Skelleftea, has a capacity of 16 gigawatt hours, according to BloombergNEF.
In addition to this facility, Northvolt said this month that it remains committed to the NOVO joint venture with Volvo Car in Sweden, Northvolt Drei in Germany and Northvolt Six in Canada. The company plans to communicate timelines and potential cost savings at these locations this fall.
What’s next?
Although BMW has complained about battery quality, and Volkswagen’s truck production division, Scania, once complained about slow deliveries, the companies are not closed to cooperation with Northvolt. Volkswagen said it continues to support Northvolt increasing production. BMW is also keeping the door open to bringing on Northvolt as a next-generation cell supplier at some pointbut that’s contingent on the company showing it can produce Gen6 round cells to the automaker’s specifications and at scale, according to Bloomberg’s infarmatoró.
However, the contractors’ declaration of possible cooperation alone may not be enough to save Northvolt. Unfortunately for the company the Swedish government made it clear that it would not bail her out. However, Germany claims that it is in “constant contact” with Northvolt. What does this mean? It’s hard to say.
Chinese batteries are much cheaper. Cost of lithium iron phosphate batteries in $/kWh / Bloomberg
Analysts such as BloombergNEF’s Vagneur-Jones say the EU may be forced to act to save the European battery industry and may even “explore the possibility of introducing tariffs on batteries” as the global battery market is dominated by competition from China.
