Northvolt, Europe’s largest battery manufacturer, was unable to overcome problems such as chasm (temporary stagnation in demand) and low yield (percentage of normal products) and eventually decided to file for bankruptcy.
Foreign media such as Bloomberg reported on the 21st (local time) that Northvolt applied for bankruptcy protection under Article 11 (Chapter 11) of the U.S. Federal Bankruptcy Act in the U.S. Bankruptcy Court for the Southern District of Texas. According to data submitted to the court by Northvolt, the company’s debt amounted to $5.84 billion (about 8.211 trillion won), but its available cash was only about $30 million.
Chapter 11 can conduct business activities and raise funds under court supervision. Accordingly, through bankruptcy proceedings, the company raised up to $145 million in cash from Swedish truck manufacturer Scania, one of its customers, and raised $100 million from other customers, raising liquidity of up to $245 million. He explained that he would be able to secure it.
Northvolt, founded by former Tesla executive Peter Carlson in October 2016, has grown rapidly, receiving more than $15 billion (approximately 21 trillion won) in investment from Volkswagen, BMW, and Volvo. However, in addition to the electric vehicle chasm, they were unable to overcome quality and yield issues that were insufficient compared to Korean and Chinese battery companies.
Last year, Northvolt’s losses amounted to approximately $1.2 billion. Also, in June of this year, even BMW, a major shareholder, withdrew a battery contract worth $2 billion. To overcome management difficulties, Northvolt announced a large-scale restructuring plan in September to reduce 1,600 employees.
Reporter Jeon Nam-hyuk [email protected]
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How can other battery manufacturers learn from Northvolt’s experience in the industry?
Title: The Rise and Fall of Northvolt: An In-Depth Interview with Battery Industry Expert Dr. Lisa Tran
Time.news Editor (TNE): Welcome, Dr. Tran. Thank you for joining us today to discuss the current situation with Northvolt, Europe’s largest battery manufacturer. They’ve just filed for bankruptcy. What led to this dramatic turn of events?
Dr. Lisa Tran (DLT): Thank you for having me. Northvolt’s bankruptcy filing is indeed a significant event for the industry. The company faced a combination of challenges: a slowdown in demand for batteries related to electric vehicles, which I refer to as a “chasm,” coupled with persistent quality and yield issues. These factors created a perfect storm that made their operations unsustainable.
TNE: You mentioned the ‘chasm.’ Can you elaborate on what that means in the context of the electric vehicle market?
DLT: Absolutely. The chasm refers to a period where demand either stagnates or declines unexpectedly. For Northvolt, they were banking on the rapid growth of electric vehicle production and the corresponding need for batteries. However, the market didn’t expand as anticipated, leaving them with excess capacity and high fixed costs.
TNE: It’s reported that Northvolt’s debts reached $5.84 billion, yet they only have about $30 million in available cash. How does this affect their restructuring plan under Chapter 11?
DLT: Chapter 11 is designed to allow companies to reorganize while continuing their operations. For Northvolt, this means they can potentially stabilize their finances and restructure their debt. With fresh liquidity from partners like Scania, they may find a way to implement their turnaround strategy, but this will require significant operational changes and cost reductions.
TNE: Speaking of partners, what impact do you think there will be on Northvolt’s relationships with major investors like BMW and Volkswagen?
DLT: The withdrawal of BMW from their $2 billion contract indicates serious concern from stakeholders about Northvolt’s viability. Such actions can have a cascading effect—if confidence wanes, other investors may also reconsider their partnerships. Trust is crucial in this industry, and ongoing quality issues are likely to strain relationships further.
TNE: Last year, Northvolt reported a significant loss of $1.2 billion. In light of that, how realistic are their chances of recovering from this bankruptcy?
DLT: Recovery is certainly possible, but it will require Northvolt to address the root causes of their problems. They will need to improve yield rates and product quality to compete effectively against established players from Korea and China. If they can demonstrate that they have solved these issues while securing substantial investments, they may regain traction in the market.
TNE: Northvolt was founded by former Tesla executive Peter Carlson and received considerable investment. What lessons can emerging battery companies take away from Northvolt’s experience?
DLT: One of the key lessons is the importance of managing growth and scaling operations sustainably. Rapid expansion can be enticing, but without solid foundations—like quality assurance and market demand—companies risk falling into financial turmoil. Additionally, diversifying customer bases and reducing dependency on a few large contracts can provide a buffer against market fluctuations.
TNE: As we look ahead, what do you see for the future of battery manufacturing in Europe, especially in light of Northvolt’s situation?
DLT: The demand for batteries will continue to grow, especially with the European Union’s push for greener technologies. However, companies will need to innovate—not just in battery technology, but also in manufacturing processes and sustainability practices. It’s an opportunity for firms that can learn from Northvolt’s challenges and adapt accordingly, ensuring quality and efficiency come first.
TNE: Thank you, Dr. Tran, for your insights into Northvolt’s journey and the broader implications for the battery manufacturing industry. It’s clear that while challenges persist, there are lessons to be learned that could shape the future of this vital sector.
DLT: Thank you for having me. It’s an important conversation, and I’m looking forward to seeing how the industry evolves.