Swedish battery giant Northvolt's expansion unit declares bankruptcy

STOCKHOLM

Northvolt Ett Expansion AB, a subsidiary of Swedish battery manufacturer Northvolt, filed for bankruptcy on Tuesday. The move comes in the wake of the cancellation of a major expansion project and highlights the growing challenges faced by European companies competing in the global EV battery market.

According to court filings, the subsidiary carries substantial debt, estimated between 2 billion and 3 billion Swedish crowns (USD 194 million to USD 290 million). A court-appointed bankruptcy trustee disclosed these figures to the Swedish business daily Dagens Industri. The subsidiary had been tasked with a crucial project to triple the production capacity at Northvolt's gigafactory in northern Sweden before the company's board cancelled these plans last month.

A Northvolt spokesperson, addressing the situation via email to the media, characterised the bankruptcy as "a necessary step" following the halted expansion of Northvolt Ett. The spokesperson emphasised that continuing investments in the expansion project would have jeopardised Northvolt's overall financial foundation. The company was quick to clarify that the bankruptcy filing affects only the expansion subsidiary and has no impact on other Northvolt Group operations.

The bankruptcy filing reveals immediate financial pressures, with the subsidiary facing approximately 459,000 Swedish crowns in defaulted debt and claims of 47 million crowns in overdue bills, according to Sweden's debt enforcement authority, Kronofogden. The authority also reported that other Northvolt units had accumulated about 85 million crowns in overdue bills.

This development follows Northvolt's September announcement of plans to downsize and reduce its workforce, sparking concerns about the future of what many considered Europe's best prospect for a homegrown EV battery champion. The company has faced multiple challenges, including production difficulties, dampened demand, and intensifying competition from Chinese manufacturers.

The situation highlights the precarious position of European battery manufacturers in the global market. Northvolt, which has previously secured more than USD 10 billion in equity and debt financing from major players including Volkswagen, Goldman Sachs, and BlackRock, has been actively seeking additional funding to support its expensive operational scale-up.

Earlier this year, Northvolt had secured a promising USD 5 billion green loan package from a consortium of lenders, primarily intended to finance the now-cancelled plant expansion in Sweden. The cancellation of this construction project has placed this funding in jeopardy, further complicating the company's financial outlook.

Despite these setbacks, Northvolt maintains that it "continues to be in dialogue with stakeholders for continued cooperation within Northvolt Group's ongoing operations." The company has declined to provide specific comments on the debt level at Northvolt Ett Expansion AB.

Industry analysts suggest this development could have broader implications for Europe's ambitions in the EV battery sector. As global competition intensifies and market dynamics evolve, European manufacturers face mounting pressure to remain competitive while managing the substantial costs associated with developing and scaling battery production capabilities.