BMW’s Exit Sparks a Domino Effect
Northvolt AB, once a beacon of hope for Europe’s green energy aspirations, faced a swift and dramatic collapse triggered by BMW AG pulling a multi-billion-dollar order in June. The Swedish battery maker, which had positioned itself as a cornerstone for the region’s electric vehicle (EV) future, saw its financial foundation crumble. Despite attempts to regain momentum through scaled-back expansion plans and workforce reductions, the company ultimately filed for Chapter 11 bankruptcy less than six months later.
The financial unraveling highlighted deep-rooted issues within Northvolt’s operations and Europe’s automotive sector, exacerbated by stiff competition from Chinese and South Korean rivals. Co-founder and CEO Peter Carlsson, who resigned after the bankruptcy announcement, admitted missteps in managing the company’s expansion strategy. He also warned that Europe risks falling behind in the global race for clean energy dominance. Northvolt, once touted as a potential IPO candidate valued at $20 billion, now requires $1.2 billion to finance its restructuring plan.
A Web of Financial Losses
Northvolt’s collapse sent shockwaves through its investors, which included industry heavyweights like Goldman Sachs Asset Management, Volkswagen AG, and Denmark’s ATP pension fund. Goldman Sachs is poised to write down $900 million from its investment, while Volkswagen, which owns a 23% stake in Northvolt, faces significant financial repercussions. The battery maker’s inability to meet production targets, particularly for BMW’s electric i4 sedan and iX SUV, revealed deeper operational inefficiencies. Production delays pushed delivery timelines to 2026, three years past the original target.
Efforts to secure bridge financing fell through as confidence eroded. In October, a $300 million emergency aid plan involving lenders, creditors, and customers came close to fruition but ultimately failed. Volkswagen, grappling with its own challenges due to stagnant EV sales and economic slowdowns in Europe and China, withdrew from an equity funding round in August. By the time Northvolt filed for bankruptcy, the company’s coffers were nearly empty, with just $30 million left from over $10 billion in investor funding.
What’s Next for Northvolt?
Despite its setbacks, Northvolt isn’t closing its doors entirely. It plans to emerge from bankruptcy as a leaner operation, with a focus on finding strategic or financial partners. Scania CV AB, one of Northvolt’s key customers, has committed $100 million in debtor-in-possession financing at a steep 16% interest rate. Additionally, the company has access to $145 million in cash collateral. Projects in Germany and Canada, excluded from the bankruptcy process, remain postponed but not canceled.
The Swedish firm is also preparing for a worst-case scenario. It has engaged Hilco Global to explore asset sales and a possible liquidation process if fundraising efforts fail. German Economy Minister Robert Habeck expressed cautious optimism about Northvolt’s future, underscoring the company’s importance in Europe’s green energy agenda. However, Northvolt’s journey serves as a stark reminder of the challenges facing the European EV sector in competing with global players.
While Northvolt aims to recover, its collapse has become a sobering symbol of the EV industry’s growing pains. Whether it can reinvent itself or fade into history remains a critical question for Europe’s clean energy ambitions.
