The collapse of EV battery-maker Northvolt has left climate and energy investors reevaluating their positions, after the once-lauded startup this week filed for bankruptcy in Sweden.
Over the past six years, Northvolt went from raising a $1bn funding round — Europe’s biggest ever at the time — to making sweeping internal cuts and pleading with creditors to help extend the company’s runway.
The first signs of trouble emerged in late 2022 with a series of production delays. Within a year, Northvolt’s losses increased from SEK 1.3bn (€113m) the previous year to nearly SEK 11bn (€950m).
After filing for Chapter 11 bankruptcy in the US in November last year, the company tried to recapitalise, courting further investment from its biggest customer, the truck manufacturer Scania, and biggest shareholder, carmaker Volkswagen — but these efforts proved unsuccessful.
“The logistics and supply chain of battery materials are incredibly complicated,” says Louis Fearn, sustainability lead at InMotion Ventures, Jaguar Land Rover’s CVC arm. “Northvolt may have failed, but it has at least laid the groundwork for the wider sector — perhaps with some lessons learned.”
The geopolitical implications are not lost on those tracking Northvolt’s downfall. In its heyday, the company was hailed as a Western challenger in an industry where Asian countries such as South Korea, Japan and, most importantly, China commanded.
Fearn says: “The collapse of a battery-maker perceived by many as Europe’s best chance at rivalling Chinese dominance in this sector has been a bitter pill to swallow.”
Upsides
While Northvolt’s fall has forced some investors to reevaluate their positions, some say upsides remain. “While this feels like a nail in the coffin for battery manufacturing in Europe, there are positives to take away,” says Marc Bouchet, a senior investment associate at TDK Ventures, an early-stage investment firm focused on climate and energy tech.
“The talent and ambition of Northvolt’s employees are comparable to those at Tesla and this could lead to a wave of ex-Northvolt talent similar to the former Tesla employees who went on to found deeptech startups in the US.”
But is there a chance Northvolt’s failure will weaken investor confidence in climate tech?
"The short answer: No,” Nicklas Bergman, a deeptech investor and member of the European Investment Council’s investment committee, tells Sifted. “Northvolt was an anomaly in that its ambition and capital needs were larger than anything we’ve seen before. Smaller green projects and large-scale green initiatives worth billions of euros will still find funding, though perhaps after a period of caution.”
Fearn agrees: “Some funds will rethink their capital allocation, but this will more likely be a reaction to shifting political winds, not a sudden disregard for climate tech.
“The majority won’t see the collapse of one battery company as a reason to write off the clean energy transition as a whole.”
