Northvolt, European flagship in the production of lithium-ion batteries for electric vehicles, files for bankruptcy. A situation that threatens the efforts of the European Union (EU) to build a local ecosystem in the electric automobile sector.
A European hope
The Swedish unicorn, founded in 2015, announces its placement under Chapter 11 protection of the bankruptcy law in the United States. “ Northvolt’s liquidity has become dire “, she declares in her request filed with the dedicated court in Houston, Texas. She has about $30 million on hand, which only allows her to continue operations for about a week. Its debts amount to 5.8 billion dollars. The bankruptcy filing is accompanied by the resignation of Peter Carlsson, the co-founder and CEO of Northvolt.
The young company has soared for years thanks to significant fundraising, allowing it to amass $14.26 billion. It is currently involved in several factory construction plans, particularly in North America and Germany.
In June, BMW withdrew from a crucial $2 billion contract after Northvolt failed to meet its deadlines, putting it in a highly sensitive position. At the same time, demand for electric vehicles has not grown as much as expected. The company laid off 1,600 employees, or 20% of its workforce, in September.
This event undermines European efforts to strengthen the electric vehicle industry, as competition from Chinese players like BYD becomes increasingly robust. Because Northvolt has long been considered one of the Old Continent’s best prospects to achieve this. For its part, China controls 85% of global battery cell production.
Northvolt wants to be reassuring
Despite the magnitude of the situation, the company wants to be reassuring. It used Chapter 11 to carry out a restructuring effort and replenish its funds, because this procedure allows management to maintain control of the company and manage its operations.
“ This milestone will enable Northvolt to continue its mission to establish a European industrial base for battery production “, assured Tom Johnstone, interim chairman of the board of directors of Northvolt. Now, the startup plans to evaluate investment proposals for new funds from strategic and financial investors, as well as existing lenders, shareholders and customers. Volkswagen, Northvolt’s largest shareholder, says it is in close contact with the company.
For now, however, there is no guarantee that it will be able to fully recover. “ Despite near-term challenges, this action to strengthen our capital structure will enable us to meet continued market demand for vehicle electrification “, Johnstone continued. The main Northvolt factory in Sweden is expected to continue operating for the time being.
- The Swedish startup Northvolt, specializing in the production of batteries for electric vehicles, files for bankruptcy.
- It is seen as a cornerstone of the European Union’s ambitions to strengthen the local electric vehicle industry.
- Northvolt is entering a restructuring phase and is now seeking new funding to ensure its survival.
