This is an audio transcript of the Behind the Money podcast episode: ‘Why Northvolt failed to become Europe’s battery champion’

Michela Tindera
In February 2017, the FT’s Nordic and Baltic correspondent Richard Milne is just getting back into the swing of things after a vacation and he starts going through his inbox to catch up on what he’s missed.

Richard Milne
While I was away, I got an email from a contact telling me about this interesting new company.

Michela Tindera
The name of the company doesn’t really stand out, but their pitch does.

Richard Milne
It had a terrible name at that time. SGF Energy. Nobody had written about it, but it was run by these two Europeans who used to work for Tesla. So they were looking to be the first European company to build a gigafactory, which is basically just a giant factory that makes batteries.

Michela Tindera
Asia is leading the global battery industry at the time, but this little Swedish start-up wants to change that.

Richard Milne
So their big pitch was to be the green European alternative to the already sort of dominant Asian battery players. You know, this is something the European industry needed but didn’t have. I was both sceptical and intrigued. So I got in touch. I ended up speaking to them and basically wrote the first article about what became Northvolt.

Michela Tindera
So SGF Energy. It now has a new name, Northvolt. Richard, so tell me that pitch. How would you say that’s turned out?

Richard Milne
Well, in 2024, it’s kind of completely gone off the rails. They’re fighting for survival, all sorts of problems. So it’s going not so well.

Michela Tindera
I’m Michela Tindera from the Financial Times. Northvolt was supposed to be Europe’s battery champion. Now the company’s fallen into bankruptcy. Today on Behind the Money, how did Northvolt lose its charge?

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When my colleague Richard writes his first story about this little Swedish start-up called Northvolt in 2017, this idea of the green transition is well under way. Part of that includes moving away from carbon dioxide-spewing combustion engines and over to electric powered cars. And with that shift, Europe’s auto industry seems like it could be at risk of falling behind.

Richard Milne
The car industry is absolutely central to the European economy. There’s 13-14mn jobs directly and indirectly based on the car industry. And it’s undergoing this sort of gut-wrenching shift to electric cars.

Michela Tindera
At the heart of the electric car is the battery. But at the time, as I mentioned, companies in Asia are the ones controlling this market.

Richard Milne
So there’s Panasonic in Japan, you had CATL in China, you had the likes of LG and Samsung in Korea. I think there’s a feeling that if Europe lets the Asian companies dominate too much, then they can take over everything. So not just batteries, but they take over the whole car industry. If that was to carry through, then the thinking goes that, you know, the European car industry could shrivel dramatically. It’s crucial to get a beachhead really against the Asian players who are otherwise dominant in the field.

Michela Tindera
Early on after hearing about Northvolt, Richard gets the chance to interview the company’s CEO, Peter Carlsson, who appears to have Europe’s answer to this battery dilemma.

Richard Milne
Back in 2017, he told me, if nobody does anything, Europe is going to be completely dependent on an Asian supply chain. Europe has the opportunity to act for its own energy independence. He said it’s now or never.

Michela Tindera
Peter Carlsson tells Richard that he has a big plan in mind to compete with the Asian players. He wants to raise $4bn to set up Europe’s first battery factory somewhere in Scandinavia.

Richard Milne
What seems like it’s going to be their big problem is financing, you know, $4bn for an unknown company sort of straight off the bat is enormous. I mean, most start-ups start with a few million here and do something and a few million more. But Northvolt is building a very complicated factory that needs a lot of machinery and needs a lot of talent. And it’s a machinery that is very, very costly to operate until you get to a certain scale where you make enough batteries that you’re suddenly profitable. So Northvolt needed to kind of go all in from the beginning, but they had some pretty impressive names almost from the start.

Michela Tindera
Their roster of both debt and equity investors becomes a who’s who of industry and finance in Europe.

Richard Milne
They start to get a lot of financial investors like Goldman Sachs, UniCredit, SEB, JPMorgan, Deutsche Bank, Citi.

Michela Tindera
Northvolt also secures investment another way: companies that will become their future customers. That’s carmakers like Volkswagen and BMW. They signed on with the company to be both investors and to promise to buy Northvolt’s batteries from them in the future.

Richard Milne
At its core, I think it’s just the idea that the green transition is this huge opportunity. It’s going to require an enormous amount of capital, but it could provide big returns for investors. So when interest rates are low, which they are in 2017, ’18, ’19, ’20, you know, this looks like a pretty good bet for a lot of these players.

Michela Tindera
In late December of 2021, after years of fundraising and building, Northvolt hits a major milestone. The company announces that they’ve become the first homegrown start-up to design and produce a battery inside a gigafactory in Europe.

Richard Milne
This was a big moment. I mean, they’d shown that they could do it on the finance side. Now they were showing that they could actually do it operationally. This was the first sign that, you know, maybe they’d be able to compete with the Asians.

Michela Tindera
Just a few weeks later. Richard decides to go see for himself what’s happening at this gigafactory in Sweden. And he has kind of a long journey ahead of it.

Richard Milne
So I first went to Skellefte?, their main factory, in January 2022. I thought I had to go and check it out for myself. I took a plane to Stockholm and then another plane up to Skellefte?. Skellefte? is this remote, sleepy town. Been pretty down on its luck for decades, really, until Northvolt came calling. And obviously land, it’s pretty damn cold. I mean, the drive from the airport into the town and then to the factory itself was pretty hair-raising, very icy.

[AUDIO CLIP OF WIND]

So you kind of go through this dense, very Nordic, very Swedish forest, just trees upon trees upon trees and with snow on the ground and then kind of rising out of the horizon. You know, there’s almost like this alien spaceship there, covering hundreds of football pitches, basically this very flat white factory. And it’s one of the biggest factory areas I’ve ever been to.

Michela Tindera
Northvolt had selected this remote town near the Arctic Circle because there’s this huge amount of abundant clean energy in the form of hydropower nearby. Setting up there would help with the company’s pitch that their batteries would be the greenest in the world. And once Richard got up to this alien spaceship factory, he spent some time inside walking round.

Richard Milne
Inside the factory is just this absolute sort of beehive of activity. There were machines running. There were machines being installed. There are things that are being constructed. I mean, there’s still Covid going on. So you got people wandering around in masks, sort of also looking like aliens almost in their spacesuits to avoid the batteries being contaminated. And what they told me they were aiming for at that time was to produce enough batteries to power 1mn cars a year.

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Michela Tindera
So things are looking good. They’ve hit this milestone, you know, creating the first battery in Europe made by a European start-up. But now it’s time to tackle the real challenge: operate at scale and deliver batteries to these customers who are relying on them, like BMW and Volkswagen.

Richard Milne
And they seem to be ticking the box one by one. But the hurdles at the same time are getting bigger and bigger. And the one they’ve still got to get over is the tallest one. And it’s executing it, producing a lot of batteries.

Michela Tindera
In the months after Richard’s visit to the gigafactory, the good news kind of just keeps rolling in. They’re raising even more money. They’re on their way to becoming Europe’s best-funded start-up. And they’re setting their sights on expanding even more.

Richard Milne
Pretty soon they decide to build a second factory in Sweden and a joint venture with Volvo cars. They want to build a third factory in Germany and a fourth factory in Canada. At the same time, they’ve got an energy storage factory in Poland. They’ve got a recycling joint venture with Hydro of Norway. So it just got this dizzying number of projects that they’re trying to do. I think there was this sense that it was trying to almost run before it could walk in a lot of areas all at once. And, you know, it kept on saying it thought it could do it. And I think, you know, that was probably because they just got so much money. But I always remember thinking, like, how can you keep all these plates spinning in the air?

Michela Tindera
After so much positive news in Northvolt’s earliest years, later in 2023, things at Northvolt take a tragic turn.

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Richard Milne
There’s an explosion on a production line in the Northvolt factory in November. And a month later, a 25-year-old Northvolt employee dies from the severe burns that he sustained in that. And separately, a construction worker dies in a crane accident at the factory.

Michela Tindera
It’s a dark time for Northvolt and it leads to problems down the line with their output.

Richard Milne
They have to stop production in Skellefte? and that causes issues with their deliveries. You got truckmaker in Sweden Scania complaining that they’re not getting enough batteries.

Michela Tindera
It doesn’t stop there, though. More news tied to their production output comes out months later in the summer of this year. They’re losing a key partner.

Richard Milne
So BMW, the German luxury-car maker, was one of the first customers for Northvolt. They had a $2bn contract to get batteries for one of their models. They cancelled that contract. They give it to an Asian supplier and the alarm bells start to ring louder for Northvolt. You know, this is a customer saying we don’t think we can get enough batteries on time from Northvolt, so we’re looking elsewhere.

Michela Tindera
Remember, its massive factory in Sweden should be able to churn out batteries for hundreds of thousands of cars. But in reality, Northvolt is only producing a tiny fraction of that. Richard tells me it’s more like 1 per cent of their total capacity. Plus, there’s a broader issue.

Richard Milne
You’ve got the backdrop of weakish demand for electric vehicles in Europe, worse than expected sales. So investors are starting to get jittery over the green transition as a whole, and they’re worrying whether Northvolt can do it because, yes, they’ve raised lots of money, but it’s still the issue for years has been can they execute, can they make enough batteries? And there are growing signs that they can’t make enough batteries. So this kind of starts snowballing pretty quickly.

Michela Tindera
In late July this year, Richard gets a chance to interview Northvolt CEO Peter Carlsson again. Remember, the first time they spoke Carlsson said that it’s now or never for Europe to seize this opportunity and develop its own energy independence.

Richard Milne
So there were a lot of questions in the air after the BMW announcement about what this meant for Northvolt. So we get on a call with him and, you know, we talk about some of the issues. We talk about the workers’ deaths and how serious that is. He tells me that he’s still confident that Northvolt can compete with Asian battery makers.

Peter Carlsson voice clip
We will need to prove that we can match them in execution.

Richard Milne
And kind of out of nowhere, he announces that Northvolt is undertaking this strategic review.

Peter Carlsson voice clip
And that’s also why we are also doing kind of a strategic overview of our business plan and our growth plan and the different timelines to make sure that the core energy in all of Skellefte? is getting all focused to get up and running before we take the next step.

Richard Milne
You know, strategic review, that’s normally a code word for selling things or shutting things down. And he basically hints that the expansion of Northvolt, so these extra factories in Canada and Germany, could be put on hold and they’re going to look at the whole business and what they do with it.

Michela Tindera
The strategic review quickly turns into a lot of action.

Richard Milne
The headlines are that they cut a quarter of their jobs in Sweden, which is where they have pretty much all their jobs. They focus almost everything on their existing factory in Skellefte?. A lot of the peripheral businesses, so recycling, energy storage, they’re either going to be sold or at least put on pause. And on top of that, they were trying to raise money, billions and billions of dollars for a sort of normal fundraising package. And through this process, that becomes a kind of rescue package that they need. And that sum of money sort of gets cut and cut and cut as investors seem to balk at backing them. And you got the Swedish government saying that they’re not going to rescue them. And so suddenly they really are fighting for their survival.

Michela Tindera
Northvolt is on the ropes. They’re trying to raise money, but investors aren’t so interested, especially given how demand for EVs has slumped. Europe’s great hope in the battery race is running out of juice. And this leaves Richard with a bunch of questions. He wants to know exactly what happened here. What was going on inside the company that led to all these problems?

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From 2023 into 2024, Richard is watching this slew of bad headlines coming out of Northvolt. But it wasn’t really clear to him what was happening behind the scenes.

Richard Milne
I’d written and lots of other people had written a sort of it’s gone wrong for Northvolt. This is terrible news for Europe. But what I felt was missing was a story from inside the company as to what actually had gone wrong. And so I and a couple of colleagues at the FT started digging in and started trying to find past and present employees from Northvolt.

Michela Tindera
Richard says it’s a pretty difficult process to find these sources. Northvolt told its employees not to talk to the media.

Richard Milne
But through a sort of variety of methods, we managed to speak to 10 workers past and present, and, you know, there was a pretty coherent picture. It wasn’t like there was one single issue that had floored Northvolt. There was a sense absolutely, you know, as I kind of feared for a long time, that Northvolt was trying to do too much too quickly.

Michela Tindera
Those sources tell Richard that the company’s problems fell into a few buckets, and they all played a role in the company’s inability to make batteries at the scale their customers and investors were counting on from them.

Richard Milne
The first of these would be incompetent management that Northvolt hired, you know, a lot of people and that the middle ranks in particular, they didn’t really know enough what they were doing.

Michela Tindera
As you can probably guess, while Skellefte? might have been a town that was rich in hydropower, it wasn’t exactly teeming with experts in battery manufacturing.

Richard Milne
So at the very top level, really, it’s Japanese or Korean battery engineers. But then there were thousands and thousands of other positions. And, you know, not much experience in Europe with that. So you’re hiring a lot of kind of middle managers who maybe have factory experience or maybe have automotive experience, but not the sort of deep battery experience of the Asians. A second issue was the poor safety standards. Now, you know, this came to air with the tragic deaths in 2023, but some of the tales, we’re told, were pretty hair-raising.

Michela Tindera
Northvolt itself has said that the accident level is comparable to other industrial companies, but it’s still not where they want it to be.

Richard Milne
A third issue would be that I eventually learned that a lot of these machines that I saw when I toured Northvolt’s factory back in 2022 had actually come from Chinese or South Korean companies. And Northvolt was quite reliant, you could say, maybe even overreliant on that machinery. And some of the main machines that they used needed a lot of Chinese and Korean engineers to be on-site to install and to operate them. And they seemed to be there for a very long time.

Michela Tindera
Having workers who spoke different languages made it tough to communicate even simple things.

Richard Milne
There were a couple of specific incidents that were mentioned to do with the Chinese workers in one case. Non-Chinese workers were in a drive room in a factory when the fire alarm went on and they didn’t hear it. And a Chinese worker had to come in and using Google Translate said, you know, there’s a fire alarm going on. Now, the Chinese company involved, Wuxi, says that it’s normal in a ramp-up phase that they have engineers on-site to operate the machinery. But quite a few of the employees found that quite striking.

And then the fourth issue was, I guess you could call it misuse of capital, that this was a company that kind of had so much money. That wasn’t what was constraining it. So it was burning through cash unnecessarily. It was paying too much to suppliers to get things done today where it could have halved the bill if it had waited a week or something, that it was doing things to unrealistic deadlines to, you know, meet investor demands rather than doing it properly.

Northvolt press conference moderator voice clip
Welcome to Northvolt’s press conference. Now I will hand the conference over to CEO and co-founder Peter Carlsson. Please go ahead.

Peter Carlsson voice clip
Hi, everybody. Sorry for?.?.?.?

Michela Tindera
In late November, Northvolt announced that it was filing for bankruptcy in the US. The company had debts of $5.8bn and just $30mn in cash, enough to support its operations for about one more week. The next day, Richard attends a press conference held by the company. On the call, Carlsson tells journalists that he would be resigning.

Peter Carlsson voice clip
And that I, in the company, step down as CEO and maintain my role at the board, supporting also the company, that is like a baby for me, in any capacity that I can.

Richard Milne
I mean, this is big news, right? Carlsson says on the call himself Northvolt is his baby. He’s the one that’s formed it. And now he can see the sort of dreams he had potentially dying in front of him. And he has to take responsibility for that.

Northvolt press conference moderator voice clip
The next question comes from Richard Milne from Financial Times. Please go ahead.

Richard Milne
Yeah. Morning, Peter. First of all, maybe a big one. Backward looking, in your words, what has gone wrong?

Peter Carlsson voice clip
Yeah. You know, obviously I’ve been reflecting a lot about the last year, 18 months. In hindsight, we’ve built a very, very comprehensive plan?.?.?.?

Richard Milne
Carlsson later went on to say it was, you know, not one thing that went wrong. It was a combination of factors. He said things like there were thousands of workers from a hundred different nationalities. It was a very remote location that was difficult to attract people to. There was trouble in getting the new processes right. They had the Covid-19 affecting the construction. And they were the first western customers of Chinese and Korean equipment makers, which meant they had all sorts of teething problems on the machines.

Peter Carlsson voice clip
We should probably, I should probably have pulled on the break earlier on some of the expansion, perhaps.

Michela Tindera
Richard, what is next for Northvolt? I mean, what happens to the company now that they filed for this reorganisation?

Richard Milne
So Chapter 11 bankruptcy is normally not the end for a company. I mean, it’s just, it’s a chance at a new beginning. Northvolt said they want to find up to $1.2bn to be able to exit Chapter 11. So they’re looking for a new investor or new investors to give them that money and to try and make the dream live again. The question is, if they couldn’t find that in the last few months, are they going to be able to find it now?

Michela Tindera
So what happens to the investors who already put so much into this? You know, I’m thinking of firms like Goldman Sachs or the car companies?.?.?.?Volkswagen.

Richard Milne
So like in most bankruptcies, if you’re an equity investor, if you’re a shareholder, you’re probably going to get wiped out or near-enough wiped out by this. Now, the FT, I broke this story. Goldman Sachs, which, let’s remember, is the second-largest investor in Northvolt, they sent a letter to investors in their funds and said by the end of this year, we’re writing down the value of our Northvolt investment to zero. And they’ve got about $900mn of investment. And you know, for other investors, it’s going to be a similar tale. But the problem, I guess, overall is that a lot of big-name investors have put quite a bit of money into Northvolt. This was one of the stars of the green transition in Europe. And most, if not all of that money, is now gone.

Michela Tindera
What does this mean for the future of battery-making and electric vehicles in Europe? I mean, can another company ever try this again or has the pot been spoiled?

Richard Milne
Northvolt was the pioneer. It was pretty long way ahead of everybody else. What you’re left with now in Europe is a lot of decent-sized battery companies that are more connected with a single carmaker. So Volkswagen has a battery make called PowerCo. Renault has one called Verkor. And maybe that’s the way that it’s going to develop. But I think lurking in the background is this sense, do the European carmakers, do European policymakers still want to have a European battery industry? Or do they throw in the towel and leave it to the Chinese, leave it to the Japanese, Koreans?

I think, you know, right now the jury’s probably a bit out. But I think it’s still too crucial for them to give up entirely. It’s just that maybe we’re looking at more the European players carving out a little niche for themselves and the Asian players having the kind of mass market of this.

Michela Tindera
Now, Richard, as someone who’s reported on Northvolt for, you know, something like seven years, what have you learned?

Richard Milne
I mean, one thing is that risky investments are risky investment. I mean, it is hard to build something completely new. It involves a huge amount of hard work, a huge amount of money. And even then, you’re not sure it’s going to come off. And that was the case here. I mean, I want to stay optimistic for Europe’s behalf, but it’s pretty easy when you look at what happened to Northvolt to get sort of quite pessimistic.

You’ve got the US and China, which are huge domestic markets. Europe sort of struggles on that front. And you know, so a company like Northvolt got a lot right. It got its financing right. You know, it had ambitious plans, but it didn’t get the execution right. And that is a problem for Europe. Now, let’s hope that somebody else can fill that gap. Maybe Northvolt can come back from Chapter 11 to fill that gap on its own, but at the moment it looks a little bleak.

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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Sound design and mixing by Sam Giovinco and Joseph Salcedo. Topher Forhecz is our executive producer. Cheryl Brumley is the global head of audio. Original music is by Hannis Brown. Thanks for listening. See you next week.