Northvolt: How the European ‘Champion’ in Batteries Fell into Crisis

The Swedish battery factory Northvolt was envisioned as the base of European battery production and as the most important European green project that has so far raised over $15 billion through equity, loans, and subsidies. This startup was supposed to counter Chinese dominance in this key industry, but things do not seem to be going according to plan.

Northvolt is plagued by problems ranging from incompetent management and poor safety standards to excessive reliance on Chinese machinery, say current and former workers of the Swedish battery manufacturer, which has found itself in a significant financial crunch.

Ten former and current employees of the best-funded startup in Europe told the Financial Times that the crisis was caused by a series of issues as they tried to do too much too quickly.

– Making batteries is hard, really hard. We tried to do almost everything at once while the problems just piled up. I just don’t know if they can succeed now – said one former senior executive.

Founded in 2017 by two former Tesla executives and supported by companies including Volkswagen, Goldman Sachs, BlackRock, and Siemens, Northvolt grew rapidly as it sought to become a European giant in battery manufacturing, with its workforce reaching 7,000 this year. The project was meant to symbolize Europe’s return to this key technology, but instead, it is struggling for survival while seeking fresh capital to continue operations, even though more than $15 billion has already been invested in it. Consequently, investors have gradually pulled the brakes, and the company is now in danger of becoming a story of hubris and how Europe fails to compete with large Chinese, American, and other Asian rivals.

– Not only are the Chinese better, they are faster. The problem is that we are late to the party – metaphorically said one former chemical engineer at Northvolt.

Chinese Dependency

Although Northvolt has hired top talents for battery production from Japan and South Korea to reduce European dependence on China by developing its own active material and finding new sources of raw materials, this has not happened. Instead, in the northern Swedish town of Skellefteå, where the only factory is located, only workers managing Chinese machines have arrived. One worker said there are hundreds of Chinese and Koreans in Skellefteå, and they mostly stay in their separate camp, only showing up each day to start the machines.

Chinese workers – especially from Wuxi Lead Intelligence, the world’s largest manufacturer of battery production equipment – have stayed longer than expected, according to a former research and development engineer.

All former and current Northvolt employees who spoke to the FT requested to remain anonymous, saying the company told workers not to talk to journalists.

Northvolt has continued with ambitious expansion projects despite difficulties in Skellefteå. Even while production was at less than 1 percent capacity, this ambitious startup planned to build new gigafactories in Sweden, Germany, and Canada, an active materials factory and a recycling plant in Sweden, an energy storage business in Poland, and a unit for researching aviation batteries in the U.S. However, almost all projects and plans have been suspended or abandoned in recent months, while executives hint that new gigafactories will likely be delayed and that about a quarter of the Swedish workforce will be laid off.

– Even when we had just one or two projects, we couldn’t meet the demands. And then they talked about opening new factories when they should have focused on getting at least the first one right. They bit off more than they can chew – concluded a former research and development engineer.

Northvolt grew so quickly in terms of employees and projects that processes became chaotic, and management was often incompetent, most workers said.

– I have never seen so many managers and directors unprepared to face the situation publicly. Also, Northvolt has a lot of inexperienced workers in all areas from managers, directors, engineers, to production workers – said a quality control employee.

A former data engineer said that despite joining ‘as interns with no experience’, they were given ‘huge responsibility because there was no one else to do it’.

Green Darling

Northvolt has become a darling of green investors, raising increasing amounts of capital, and former employees believe that strong financial backing has led to questionable decisions.

– Managers did not listen carefully to engineers. They had only one goal: to deliver the project within a fixed timeframe. They didn’t care about the budget – said one of the employees. A former materials manager said there was a sense of rushing to create products to raise money.

BMW, a shareholder in Northvolt, was the first customer to raise the alarm, pulling a $2 billion contract this year and giving it to South Korean Samsung. Northvolt has also suffered from safety issues. Swedish environmental prosecutors told the FT last month that the company would soon receive a notice of investigation for suspected manslaughter following the death of a worker from injuries sustained in an explosion on the production line.

Northvolt said it is in contact with prosecutors and police but declined to comment further.

A construction contractor died late last year at the Skellefteå construction site. The police are also investigating three deaths of Northvolt workers this year under unexplained circumstances outside the factory, although the company insists that nothing connects them.

A former materials manager said there is a significant lack of safety thinking in the company.

– We were sent to areas with open containers of hazardous materials and without proper safety equipment… There is a part of me that is genuinely concerned that I might be infected with something that could make me sick – he said.

High Number of Accidents

Since 2021, the company has reported 47 workplace accidents involving chemicals classified as particularly hazardous, according to the Swedish Work Environment Authority.

Mikael Stenmark, a union safety representative at Northvolt, told SVT that workers did not understand the importance of risk removal. Northvolt told the Financial Times that it meets the highest safety standards according to the law, emphasizing that safety is key to their battery cell production, and that lost time due to injuries is comparable to other Swedish industrial companies.

The company also acknowledged problems in collaboration with its Chinese partner Wuxi, which is responsible for equipment delivery. Peter Carlsson, co-founder and CEO of Northvolt, stated last month that there are challenges in aligning operations with the Chinese company, which has not previously worked with European clients. Nevertheless, Carlsson emphasized that the commitment of workers from Wuxi is strong, and that production at the Skellefteå factory has quadrupled since the beginning of the year. Wuxi responded that it has a long history of delivering reliable high-performance equipment and that the presence of their staff on-site is a common industry practice to ensure optimal performance during installation and production ramp-up phases.

However, despite the efforts, Northvolt is facing financial problems. The company is struggling to raise new funds, and in recent weeks has reduced its target from several billion euros to 200 million euros. The subsidiary Northvolt Ett Expansion, which was supposed to expand the factory in Skellefteå, declared bankruptcy last week.

This financial crisis comes at a time when electric vehicle sales in Europe are slowing, and manufacturers like Volvo and Volkswagen are scaling back their electric ambitions. A major European investor in the automotive industry, who has not invested in Northvolt, stated that the idea of building a factory in Sweden has always been problematic.

– They did not have enough qualified workers or the necessary skills, and they received too much money too quickly – said the investor.