European EV Battery Maker Files for Bankruptcy

(L-R) Swedish Ambassador to Germany Veronika Wand-Danielsson, Schleswig-Holstein Prime Minister Daniel Guenther, German Chancellor Olaf Scholz, German Federal Minister for Economic Affairs and Climate Protection Robert Habeck, Northvolt CEO Peter Mikael Carlsson, and Northvolt-Germany CEO Christofer Haux are pushing a button for the new Northvolt Gigafactory electric car battery factory in Lohe-Rickelshof, Germany, on March 25, 2024. Gregor Fischer/Getty Images

Swedish electric vehicle (EV) battery manufacturer Northvolt filed for bankruptcy after the company’s dreadful liquidity position left the business with only one week’s worth of cash to fund its operations.

The Chapter 11 petition was filed at the U.S. Bankruptcy Court for the Southern District of Texas on Thursday. The company listed assets and liabilities in a range of $1 billion to $10 billion, with creditors estimated to be between 1,000 and 5,000. Established in 2016 in Stockholm, Northvolt is an energy-storage company that manufactures lithium-ion batteries.

A leading manufacturer in the European Union, Northvolt competes with China’s BYD and CAT to supply batteries to carmakers in the region. As such, the bankruptcy of Northvolt presents a challenge to Europe’s ambitions to counter Chinese EV dominance.

The company’s “liquidity picture has become dire,” according to a filing made by Scott Muller, senior managing director of Teneo, which is acting as a financial adviser to the battery manufacturer.

The company currently has $30 million cash in hand, which is only enough to support operations for a week, he said.

“At bottom, the battery manufacturing industry is capital intensive, and the company has yet to turn a profit. Revenues generated have been invested back into the company to support its operations and growth. And despite its significant investments, Northvolt has faced production shortfalls,” the filing said.

The company also raised a significant amount of debt to fuel its operations and support growth. Northvolt’s business plan was based on the expectation that the EV industry would see consistent growth.

However, EV sales started slumping last year. As a consequence, battery manufacturers saw cancellation of contracts and lower orders and were forced to renegotiate terms, the filing said.

At the same time, Asian manufacturers continued to ramp up production while bringing down battery prices, which put “further stress on newer battery manufacturers like Northvolt.” Facing such challenges, the company suffered a net loss of $1.2 billion in 2023.

Despite Northvolt taking steps to pull itself out of the financial quagmire, things have been hard for the company, the filing said. Northvolt finally decided to go ahead with the Chapter 11 bankruptcy.

Slowing EV Sales Challenge

The bankruptcy-restructuring process will help the company access new funding, which includes $145 million in cash collateral, Northvolt said in a Nov. 21 statement. One of the company’s customers has also committed to providing $100 million in financing to support the manufacturer’s operations.

Northvolt said business will go on as usual while the reorganization proceedings move ahead.

“The company will continue to make deliveries to customers while fulfilling obligations to critical vendors and payment of wages to employees,” it said.

The company expects the restructuring process to be finished in the first quarter of 2025.

Amid Northvolt’s bankruptcy filing, the company’s CEO and founder, Peter Carlsson, stepped down from the role. The bankruptcy gives the company enough time to reorganize and ramp up operations, he said. Carlsson will now assume the role of senior adviser at the business.

In September, Northvolt announced laying off 1,600 workers at its Swedish base, accounting for almost 20 percent of the company’s global force. It had attributed the decision to a “challenging macroeconomic climate” forcing the manufacturer to lower its ambitions.

“While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate,” Carlsson said at the time.

A June report from Ernst & Young revealed that EV adoption was slowing down in Europe because of factors such as high vehicle prices and insufficient infrastructure.

“The current global EV marketplace is mired with a lot of uncertainty around economic prospects, varying regulations across markets, consumer anxiety, and lagging infrastructure build-up,” said Martin Cardell, Ernst & Young’s global mobility solutions leader. “The result has been a plateau in EV sales in the U.S. and Europe.”

Meanwhile, Northvolt said that the bankruptcy filing in the United States will not threaten the company’s planned $7 billion EV battery plant in Quebec, Canada.