Northvolt is going through a tough time.
There's no denying that Northvolt has been facing significant challenges in recent months. The company has experienced a decline in demand, coupled with production setbacks and a major contract cancellation from BMW.
These factors have put pressure on Northvolt's financial outlook and forced it to announce the implementation of restructuring measures. Then, of course, there are the rumblings of safety concerns and the investigations into deaths of Northvolt employees.
But it's important to remember that Northvolt isn't the only electric vehicle (EV) battery cell manufacturer facing difficulties. These cost-cutting measures haven't happened in isolation.
In June, the Automotive Cells Company, a joint venture between Mercedes-Benz, Stellantis, and TotalEnergies, halted its construction of battery cell plants in Germany and Italy.
Earlier this summer, the Chinese battery company SVOLT, which had planned to build two plants in Germany, announced it would not be building its planned factory in Lauchhammer, about 150 kilometres south of Berlin. Meanwhile, the construction of SVOLT's plant in Saarland is still facing delays.
The planned capacity of battery factories far exceeds demand for the next ten years. But whereas much of the planned capacity might not actually materialise, Northvolt is already up-and-running.
Indeed, despite the current difficulties, there is reason to believe that Northvolt's financial problems are temporary and that the company is set for long-term success. The fact the company has taken decisive action over its financial problems will likely be seen as positive by investors.
Peter Carlsson, CEO Northvolt, oktober 2022 in their office in Stockholm.
Also read: Northvolt to cut jobs, mothball cathode plant
Furthermore, the global market for EV batteries is expected to grow substantially in the coming years, driven by the increasing demand for electric vehicles. As the world transitions to cleaner forms of transportation, the need for high-quality batteries will only intensify. This is not an industry that will disappear.
The recent decline in the European EV market is primarily due to a combination of factors, including economic uncertainties and supply chain disruptions.
While this has clearly created short-term challenges for Northvolt, it does not fundamentally alter the long-term outlook for the EV industry. As the market recovers and demand for EVs continues to rise, Northvolt will be poised to capitalize on the growing opportunities.
Northvolt's strategic partnerships and strong investor base provide a solid foundation for its future. The company has secured significant funding from major investors, including BlackRock, Goldman Sachs, Volkswagen, and Singapore's sovereign wealth fund GIC. These partnerships not only provide financial support but also offer valuable industry expertise and market access.
Pressed atmosphere at the gates. Ahmed Yasin, an employee at Northvolt, says it is "very sad news". He hopes everyone finds new jobs.
Also read: Northvolt CEO - "The road ahead will be turbulent"
The company is still viewed as a key IPO candidate in Europe's tech ecosystem, although the recent problems may have delayed a stock market listing.
Moreover, Northvolt's investments in research and development, coupled with its manufacturing capabilities, position it as a leader in the industry.
Northvolt's robust financial backing, strategic partnerships, and focus on innovation make it a strong contender in the competitive EV battery market. There will obviously be winners and losers in this arena. Some companies will come up short.
But Northvolt is still well positioned to overcome its current difficulties and emerge as a major player in the industry.