June 14, 2019

This Swedish startup just raised $1bn to build a battery farm to rival Tesla's "gigafactory"

How two former Tesla executives managed to get enough momentum to build a gigafactory in Europe.

Mimi Billing

6 min read

The Northvolt Lab and the Northvolt Ett battery factory are both being built in Sweden.

When former Tesla manager Peter Carlsson said he wanted to build at €3bn battery farm in northern Sweden, many thought he was crazy. But this week his almost three-year-old startup Northvolt closed a new financing round led by Volkswagen and Goldman Sachs in a massive equity round of $1bn (approximately €900m).

The first goal of the company will be to produce 16 GWh from the plant annually, but once fully operational, it will be one of Europe’s largest battery cell factories and produce 32 GWh worth of capacity annually.

In mid-2018, battery production at Tesla's Gigafactory 1 reached an annualized rate of roughly 20 GWh, although plans to produce far more.


“We knew that it isn’t possible to start off small with this kind of project, the prerequisites for this industry is going big from scratch," Carlsson told Sifted. "That was a challenge.”

Why batteries?

With a need to cut down on fossil fuels, automotive companies have all been making a push into electric cars. Volvo Cars made the headlines in the summer of 2017 by stating that by 2019, all their new cars would be electric, either partially or completely.

Volkswagen and BMW have invested heavily in the development and production of electric cars and therefore it may not come as a surprise that the two European owned car manufacturers are investing in the latest round in Northvolt.

China is ahead when it comes to battery production. According to Bloomberg data, based on planned and existing production plants, 80% of global capacity for lithium-ion batteries is likely to be in Asia, and most of it (69%) in China.

The risk is that, particularly with a brewing trade war between China and the US, this will create problems for European car manufacturers.

Factories for this will be built here either way. There are already factories being built in Hungary and Poland by Asian actors.

Europe also has an incentive to enable its member countries and car companies to a transition to renewable energy.

Approximately 13m people in Europe are working in the automotive industry and being at the forefront of technological advancement is seen as necessary to keep jobs.

As Maros Sefcovic, energy vice president of the European Commission, told the Financial Times in October of last year: “We know very clearly that the future is electric.”

“You cannot develop new models or high-quality cars if you do not master the skills, innovation, and research link with batteries.”

Carlsson says he agrees with Sefcovic, and argues that even if Northvolt and others were not looking to build gigafactories, they would still be built in Europe, but by others.


“Due to the fact that Europe has such a big automotive industry, factories for this will be built either way. There are already factories being built in Hungary and Poland by Asian actors,” Carlsson says.

Some have obviously doubted if it is really possible to pull off a project of this size, but we have always had a firm belief that it would work.

There is a risk that, without battery factories, a lot of R&D and investment opportunities will be lost to others.

Amid this risk of falling behind, the European Union has opened its deep pockets to battery projects across the region.

EU’s Horizon 2020 has set aside $1bn for battery projects and financing building facilities and the European investment bank, EIB, has let it be known that it is available to help fund the billions needed to keep pace with the US.

Model image of Northvolt's planned battery factory when it's finished building.
What the Northvolt battery factory in northern Sweden will look like when ready.

However, if Sefcovic goal to "put the EU on a firm path towards global leadership in this rapidly expanding sector” is ever to be reached a lot of investments is necessary.

In the middle of May, EIB committed €350m in a loan to Northvolt for the building of Europe’s first home-grown gigafactory for lithium-ion battery cells.

This is the largest ever direct EIB financing approval for battery technology. However, it is not the only battery project in the Union. French battery-maker Saft, Polish Umicore and Swedish renewable battery manufacturer Nilar are some of them.

Tesla experience – a door opener

Having worked at Tesla in the past, with its gigafactory in the Nevada desert, Peter Carlsson is bringing a lot of experience into the battery business in Europe. However, when founding the company in 2016, many doubted that he could pull it off. €3bn is a lot of capital to raise.

Headshot of Peter Carlsson, the Chief Executive of Northvolt.
Former Telsa executive Peter Carlsson is the chief executive of Northvolt.

“Having been part of Tesla journey for a number of years has helped me approach such a big project as this is. And since both Paolo Cerruti [cofounder of Northvolt] and I had this experience from Tesla it probably gave us a bit more credibility and opened a few more doors for us.”

“Some have obviously doubted if it is really possible to pull off a project of this size, but we have always had a firm belief that it would work and are therefore really happy now to get started in Skellefteå,” Carlsson says.

Plenty of people have put their trust in Carlsson and Northvolt though. Apart from the 300 employees the company now has, the startup has also managed to attract investors such as the pension funds of Swedish Folksam and AMF as well as the Ikea foundation IMAS.

Not just for cars

For Volkswagen who has invested €900m in Northvolt, parts of it for the equity fund and the rest in a joint venture between the battery company and the car manufacturer. The plan is to build another factory in Germany in the near future.

In the short run, car batteries may be the focus for now but in the near future, there will be a shrieking demand for batteries for lorries, aeroplanes and other forms of transportation as well.

The battery solutions will be increasingly available to other applications including aeroplanes and other kinds of transport.

Already there are companies such as Lilium, the German flying cars company, Einride, the Swedish electric truck and Heart Aerospace, Swedish electric aeroplanes company that will need batteries from somewhere and the development of how much power each battery can hold is increasing at high speed. And with the aim of hiring 500 people to its business, Northvolt plans to be part of the future.

“I believe that the high speed of development will continue until at least 2030. That means that the battery solutions will be increasingly available to other applications including aeroplanes and other kinds of transport. This is just the beginning,” Carlsson says.

Mimi Billing

Mimi Billing is Sifted's Europe editor. She covers the Nordics and healthtech, and can be found on X and LinkedIn