Europe’s ‘battery flagship’ Northvolt cuts back on workforce

Swedish battery manufacturer Northvolt, the flagship start-up in Europe’s quest to catch up with Asian and American battery giants, is drastically revising its operational activities. The company has announced plans to scale back its workforce over a slowdown in electric vehicle sales and intensified competition from China.

Northvolt is joining the string of manufacturers tuning down their production ambitions as part of the sales disruptions plaguing the energy transition in the automotive industry.

CEO Peter Carlsson explained that Northvolt must take “difficult measures” to secure its financial foundation and enhance its operational performance. As part of this restructuring, Northvolt will pause production of cathode materials at its main factory in Skelleftea, northern Sweden.

Slowdown in international expansion

This decision is a critical component of the company’s strategy to focus efforts on battery cell production, which remains the cornerstone of its operations. However, these changes will result in job cuts, though Northvolt has yet to specify the extent of these reductions. At the end of 2023, the company employed 5,860 people.

The need for measures at Northvolt has been brewing for some time. Earlier this year, Carlsson announced a slowdown in the company’s international expansion, affecting factory projects in Germany and Canada.

Northvolt’s financial troubles became more apparent at the end of the summer holidays, prompting a reassessment of its activities abroad and at home in Sweden. Northvolt recently sold its site in Borlänge, where it initially planned to produce cathode materials, and is seeking partners or investors for its energy storage business in Gdansk, Poland.

BMW cancels order

In Germany, the company had announced plans in 2023 to build a large factory (Drei) in Heide, supported by financial backing from the German government. Similarly, in Canada, Northvolt has faced setbacks, with authorities in Quebec indicating that the project could be delayed by up to 18 months. Northvolt is also reassessing the timeline for its factory project Novo in Gothenburg, Sweden, a joint venture with Volvo.

These delays and adjustments have significant implications for Northvolt’s partnerships and sales. In a notable setback, BMW recently canceled a €2 billion order for battery cells due to Northvolt’s production delays, choosing instead to work with Samsung SDI.

Northvolt’s struggle to meet its commitments underscores the broader challenges facing the European battery industry. Local automakers are scaling back their own plans for electrification amid a decline in demand for electric vehicles.

The most notable example is compatriot Volvo, a strong advocate for all-electric portfolios. The Swedish car manufacturer abandoned its 2030 deadline for a fully electric lineup, a symbolic kneefall.

Four deaths in Skelleftea

But there’s also increasing competition from Chinese battery makers, who continue to expand their cost advantage in the EV market. Northvolt has also faced recent scrutiny over safety concerns at its Skelleftea site Ett, where an investigation was launched following the deaths of four employees earlier this month.

Swedish authorities are examining potential links between the mortalities and working conditions at the factory, possibly fatal contact with specific on-site chemicals. No cause of death has been identified yet (except in one instance where the misfortune is a drowning accident), and it remains unconfirmed whether the production pause of cathode materials is related to this problem. Still, it adds another layer of complexity to the company’s already troubled operations.

Northvolt has indicated that it will confirm any potential revisions to project timelines and additional cost-saving measures later this fall.