TORONTO

In a significant development for Canada's electric vehicle (EV) manufacturing strategy, the federal government has decisively ruled out additional funding for Northvolt, following the company's Chapter 11 bankruptcy filing in the United States on Thursday.

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Sources close to the federal and provincial governments have confirmed that neither Quebec nor the Canadian federal administration intends to provide further financial assistance to the Swedish battery manufacturer, marking a critical juncture in Prime Minister Justin Trudeau's ambitious industrial and climate policy framework.

Northvolt's financial predicament was starkly outlined in its bankruptcy petition, filed in the U.S. Bankruptcy Court in Houston, where the company candidly acknowledged its "dire" liquidity situation. Despite this setback in the United States, Northvolt has emphasised that its Canadian and German operations remain unaffected by the bankruptcy proceedings.

The proposed Canadian plant, known as Northvolt Six, was originally slated to be a cornerstone of Canada's green industrial transformation. Initially announced in 2023 with a projected investment of CUSD 7 billion (approximately USD 5.17 billion), the project was set to receive substantial governmental support, with both the federal and Quebec provincial governments pledging CUSD 1 billion each for the first phase of construction.

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According to the bankruptcy filing, the total outstanding land loan from Canada to Northvolt stands at USD 181 million. Notably, the Canadian plant currently holds approximately USD 240 million in cash and was considered a "key pillar of the company's future growth strategy" by the company.

The current financial impasse represents a potential blow to Trudeau's broader EV manufacturing strategy. The Canadian government has already committed production credits and support totalling CUSD 56 billion (USD 41.34 billion) to 13 battery companies and automotive manufacturers, with Northvolt being a significant component of this industrial policy.

While Northvolt initially projected the Canadian plant would commence operations in 2026, subsequent communications suggested potential delays. The bankruptcy filing and the government's apparent reluctance to inject additional capital have cast further uncertainty on the project's timeline and viability.

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Government representatives from both the federal and Quebec provincial levels have maintained silence, declining to comment on the developing situation when approached by news agencies.

The withdrawal of potential further funding signals a pragmatic approach by Canadian authorities, who appear unwilling to commit additional resources to a company experiencing significant financial challenges. This decision underscores the delicate balance governments must strike between supporting green industrial initiatives and protecting public financial investments.