Volvo Cars plans to buy out the struggling battery maker Northvolt from their jointly owned gigafactory in Sweden in another blow to Europe’s hopes of creating a homegrown electric car battery.
Novo Energy, a joint venture between Volvo and the Swedish battery company, was launched in 2021 with a plan to create a “fully integrated and frictionless environment” for developing new battery technologies with a staff force of 3,000 to start production in 2025.
Construction on the 30bn krona (£2.2bn) factory began in Torslanda, Gothenburg, earlier this year with the intention of creating enough cells to power around 500,000 electric cars a year.
When the joint venture was launched, its chief technical officer, Eerik Hantsoo, described it as an opportunity for “closer collaboration on battery design and integration into the vehicle that is more meaningful than a simple business transaction”.
But the partnership cracked apart when Volvo Cars, majority owned by China’s Geely, announced it had notified Northvolt that it would invoke its redemption right to acquire the battery maker’s shares in the joint company.
“This action is taken after Northvolt AB breached the parties’ shareholder agreement by not fulfilling its obligations regarding financing,” the company said in a statement. “Volvo Cars is evaluating the potential consequences of this development for Novo Energy and is reviewing future scenarios to protect the investment.”
Until as recently as a few months ago, Northvolt was at the forefront of Sweden’s “green industrial revolution” and viewed as Europe’s best chance for taking on the US and China in car battery manufacture. But after months of crises – including 1,600 redundancies, suspension of the expansion of its Northvolt Ett factory in Skellefteå and rumours swirling of potential bankruptcy – those hopes are looking increasingly unlikely.
Volvo Cars said it intended to have a “constructive dialogue with Northvolt”. The factory could be “multifunctional and several options are being evaluated”, Volvo said, under the condition that it acquired full ownership.
It added: “When Volvo Cars reaches full ownership, it is not expected to affect Volvo Cars’ other planned investments or the company’s cashflow goals. Volvo Cars has a diversified and flexible battery supply chain and future car launches will not be affected.”
The announcement is the latest in a string of problems at Northvolt, which started a strategic review of its operations in the summer, leading to redundancies and factory closures.
A Northvolt spokesperson said: “Northvolt has taken the decision to not contribute further capital into Novo Energy joint-venture at this point in time. As part of its strategic review, Northvolt has decided to prioritise funding of its wholly owned cell operations in Skellefteå (Northvolt Ett), Västerås (Northvolt Labs), Heide (Northvolt Drei) and Montreal (Northvolt Six).
“The past year has brought notable change, with challenges to the overall EV market as well as our strategic review process. We remain in active and constructive dialogue with Volvo Cars on the way forward for Novo Energy, while construction is progressing on the site in Gothenburg, under the excellent leadership of the Novo team.”.”
