BMW pulls back from €2 billion battery cell deal with Northvolt

BMW announced on Thursday it’s pulling back from the €2 billion deal it concluded in 2020 with Swedish battery maker Nortvolt to deliver cells from 2024 as part of a long-term contract. But Northvolt is two years behind schedule and would deliver ‘too many rejects’, German media, like Manager Magazine, report.

BMW Group downplays the news, stating, “Northvolt and the BMW Group have jointly decided to focus Northvolt’s activities on the goal of developing next-generation battery cells.” South Korean supplier Samsung SDI will fill in the gap for BMW’s fifth generation of EV batteries used in the iX and i4.

Prismatic versus cylindrical

In those models, BMW relies on prismatic cells of various sizes. This will be different for the Neue Klasse. From 2025 on, BMW will use cylindrical battery cells, as this type of battery can lower battery system costs by as much as 30%. In 2022, BMW said its existing suppliers, CATL, Samsung SDI, EVE Energy, and Northvolt, were to manufacture the new cells.

The German magazine wrote that “if the glitches are resolved”, Northvolt could deliver these next-generation battery cells for the Neue Klasse.

In December 2021, Northolt commissioned its first Skellefteå factory by producing the first prismatic battery cell on site. Production started fully in 2022 and should have ramped up to a capacity of 16 GWh annually. That’s enough to power about 300,000 electric cars. Ultimately, the factory will output 60 GWh per year. But apparently, the Swedes can’t deliver in time for BMW.

Northvolt Drei

At the end of March 2024, the first stone was laid for Nortvolt Drei, the Swedish cell maker’s German gigafactory in Heide, a city of more than 22,000 inhabitants in Schleswig-Holstein, in northern Germany. Volkswagen had a deal with Swedes to build ‘Northvolt Zwei’ in Lower Saxony, Germany, so this plant was called ‘Northvolt Drei’.

In January of this year, the European Commission gave Germany the green light to allocate 902 million euros in subsidies for Northvolt’s plant in Heide. That should prevent the Swedes from opting for America first, lured in by President Biden’s Inflation Reduction Act.

The plant in northern Germany, positioned to produce the cleanest batteries for EVs in continental Europe with a capacity of up to 60 kWh, would start producing in 2025 at the earliest, but rather in 2026. It will run at total capacity by 2029, representing annual battery production for 800,000 to 1 million EVs.

Factory in Canada

Northvolt is also planning a factory in Canada. It chose a site on the coast of Montreal to construct its first North American Gigafactory. In September 2023, the company said it would invest five billion euros in the region.

Northvolt Six will be a cell factory for lithium-ion technology, targeting 60 GWh of annual capacity “to meet the growing demands of the North American BEV market”. In the first phase, set to be completed in 2026, only half of that capacity will be made available, with a ramp-up later. But in 2024, that ‘growing demand’ slowed down significantly, especially in the US.