Europe’s Big Bet to Lessen Reliance on Chinese Batteries Has Gone Bankrupt

What was once seen as a key element of European’s electrification strategy is in serious financial trouble. Northvolt, which is partially owned by Volkswagen and Goldman Sachs, filed for bankruptcy in Sweden this week, Reuters reports. The company filed for Chapter 11 protection in the United States in November, however, this time around, its U.S. operation and its German venture are not included in the proceedings.

Multiple manufacturers have begun negotiating with other suppliers as the situation has deteriorated in recent months, and several owners had already written off their stake in Northvolt. Porsche has begun searching for alternatives, and Scania has already secured another supplier for battery packs for its trucks.

Porsche and Volkswagen CEO Oliver Blume told a press conference that he remained “convinced” that all parties would be better off if there was “competent” battery production in Europe, but the company said only that it remained in contact with Northvolt and declined to comment further on the bankruptcy Wednesday.

European manufacturers bet big on Northvolt in the hopes that it would reduce western reliance on Chinese battery producers, such as CATL and EV builder BYD, Reuters said. VW Group once saw it as one of many building blocks in its larger plan to leapfrog Tesla. If that notion seemed a bit farfetched when it was proposed, it’s beyond ludicrous now, even as Tesla appears to have blown past a major inflection point in its global expansion.

VW’s deal with Northvolt included millions in cash that went toward the new battery maker’s expansion and the ultimate goal of establishing a joint venture capable of 40 gigawatt-hours in battery production every year. BMW also canceled a $2 billion order with Northvolt in June after the supplier was unable to fulfill a deal signed in 2020.

Former Tesla executive and Northvolt Co-founder Peter Carlsson stepped down as Northvolt CEO shortly after the Chapter 11 filing in November. according to Reuters. He previously said the company needed $1.2 billion to right the ship.

“What ultimately forced the board to take this decision last night was that it did not see a solution to the short term liquidity need,” Carlsson told reporters on Wednesday.

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