Swedish battery maker Northvolt, once hailed as a cornerstone of European electric vehicle (EV) battery production, filed for Chapter 11 bankruptcy protection in the United States on Thursday, marking a major setback for the continent’s green transition. It became.

Following the move, co-founder and CEO Peter Carlson resigned on Friday.

Mr. Carlson will remain on the board as a senior advisor. Pia Aaltonen Forsel, the company’s chief financial officer, will serve as interim CEO.

Who is Northvolt?

Founded in 2016 by two former Tesla executives, including Carlson, Northvolt aimed to establish Europe as a competitive player in a global battery market dominated by Chinese and American manufacturers.

Known for its pioneering lithium-ion, lithium metal and sodium-ion battery cells, Northvolt supplies major automakers such as Volkswagen and BMW, contributing to Europe’s strategy to reduce dependence on imports from Asia.

The company’s flagship plant in northern Sweden, Northvoldt, was a symbol of the region’s commitment to green energy.

what happened?

Northvolt’s financial problems were the result of a combination of ambitious expansion plans, slowing demand for EVs, and operational issues. The company struggled to scale production effectively and consistently missed production goals. The shortage led to the loss of a US$2.1 billion supply contract with BMW in June.

At the same time, Northvolt’s overly ambitious efforts to build multiple gigafactories, including the now-canceled Northvolt Femme in Sweden, exacerbated the funding shortfall. The company reported an operating loss of USD 1.03 billion in 2022 on modest revenue of USD 128 million. By November 2024, it had just US$30 million in cash, despite having US$5.8 billion in debt.

Efforts to secure additional funding, including government subsidies and private investment, have failed. Production delays and poor performance added to the challenge, as did a decline in EV demand in Europe reflecting broader market volatility.

Implications for Europe’s green transition

With the motto ‘Making oil history’, Northvolt was more than just a business, it was a pioneer in Europe’s green ambitions.

Northvolt’s bankruptcy is a blow to Europe’s aspirations to build a strong domestic battery industry. China controls 85% of the world’s battery cell production.

The Swedish government and key stakeholders, including Volkswagen and Scania, have expressed hope that Northvolt will recover. Interim Chairman Tom Johnston said: “This decisive step will enable Northvolt to continue its mission to establish a homegrown European industrial base for battery production.”

What’s next?

The Chapter 11 filing will allow Northvolt to restructure its debt, access $245 million in new financing, and resize its operations in line with current market conditions.

Northvolt will continue to operate as it reorganizes, and its Swedish and international subsidiaries are unaffected by the bankruptcy filing. The process is expected to be completed in early 2025 and aims to establish a more financially sustainable operation.

However, the company needs to secure another $1 billion to $1.2 billion in additional funding to stabilize.