Earlier this week, Northvolt, the Swedish battery manufacturer once valued at $12 billion and viewed as Europe’s best hope for competing with Asian battery giants, filed for bankruptcy. After failing to secure additional funding, the company officially declared bankruptcy on Wednesday, March 12, 2025. The cleantech startup had previously filed for Chapter 11 bankruptcy protection following a decade of unsustainable ambitious expansion.
Founded in 2016 by former Tesla executives Peter Carlsson and Paolo Cerruti, Northvolt aimed to transform battery manufacturing and establish a European industrial base to rival Asian manufacturers like CATL and BYD. The company raised over $15 billion from Goldman Sachs, JPMorgan, Microsoft, and Volkswagen, which held a 21% stake. Operating from its flagship gigafactory in Skellefteå, Sweden, Northvolt secured roughly $50 billion in orders and emerged as a key player in Europe’s electric vehicle transition.
When the company first filed for bankruptcy in November 2024, court documents revealed a concerning financial situation: Northvolt had accumulated approximately $5.8 billion in debt while its available cash had decreased to $30 million. This was enough to fund operations for only about seven days.
But what exactly led to Northvolt’s downfall? Tech Funding News dug deeper into the facts.
Operational chaos: 4,000 unopened equipment boxes and production at 5% capacity
The most striking disclosure of Northvolt’s operational dysfunction emerged when investigators discovered roughly 4,000 unopened equipment boxes (worth €430 million) sitting unused at company facilities. This meant only one thing – operational mismanagement that troubled the company throughout its expansion efforts.
Despite its modern facilities and strong market position, Northvolt struggled with fundamental operational efficiency. The plant operated at just 5% of its total capacity, producing only 60,000 battery units per week by September 2024, far below its designed output.
Yet, this was just the tip of the iceberg. Former employees reported poor safety standards across manufacturing operations, leading to multiple workplace accidents and fatal injuries at the northern Swedish facility. All of these caused production delays, leading to the loss of a €2 billion BMW contract in mid-2024 after Northvolt fell two years behind on deliveries.
$100M monthly burn rate pushes Northvolt to the edge
Northvolt’s cash burn was another underlying factor that hastened its path to bankruptcy. The company incurred approximately $100 million monthly losses, while production output remained too low to generate adequate revenue. This cash shortfall throughout 2024 compelled increasingly desperate measures to stay afloat.
By September 2024, the situation reached a breaking point. The company laid off approximately 1,600 employees (about 20% of its workforce) and halted its expansion plans for the flagship facility. In October, Northvolt sought bankruptcy protection for one of its expansion units while attempting to secure funding for its core operations. However, these measures proved insufficient as potential investors became increasingly wary of the company’s ability to navigate its fundamental operational and financial challenges.
The mounting crisis triggered leadership changes. CEO and co-founder Peter Carlsson stepped down in November 2024 as part of the bankruptcy process, following his earlier departure as chairman of Northvolt Ett, the company’s flagship factory. During the bankruptcy process, the company was led by CFO Pia Aaltonen-Forsell and former president of cells Matthias Arleth, who became COO.
Market headwinds also played a key role
While operational failures contributed to Northvolt’s collapse, external market challenges emerged. For example, the European electric vehicle market experienced slower growth than expected in 2024, mainly due to European tariffs on Chinese electric vehicles disrupting market dynamics. As a result, automakers scaled back their EV production targets in response to consumer demand, diminishing the projected battery needs.
Strategic missteps further weakened Northvolt’s position. This is evident in the company’s overly aggressive pursuit of vertical integration. In fact, attempting to control every aspect of battery production instead of focusing on core competencies proved unsustainable.
Industry analysts even suggested integrating second-life battery markets into Northvolt’s strategy could have mitigated inefficiencies and bolstered supply chains. Second-life battery markets entail repurposing surplus batteries for secondary applications, such as energy storage, after decommissioning them from their original use in electric vehicles. Northvolt might have realised better operational efficiency and market viability by extending the lifespan of its batteries and minimising waste, rather than relying solely on new production. However, this never happened.
Technical innovation alone cannot ensure success
As the bankruptcy process unfolds, uncertainty looms over Northvolt’s global projects, particularly its planned $7 billion Canadian gigafactory in Montérégie, Quebec. The facility had secured roughly $7.3 billion in government support from Quebec and Canada’s federal government, with plans to produce 30 GWh of batteries annually by 2026.
Though Northvolt’s North American operations remain solvent, the parent company’s collapse raises serious doubts about the timeline and funding for these ambitious projects. The Quebec government has committed $270 million, while the provincial pension investor has added $200 million.
Now, a court-appointed trustee will oversee the sale of Northvolt’s assets, including its Skellefteå factory and proprietary battery technologies. Despite interest in these strategic assets, the bankruptcy process will likely result in substantial losses for investors who had poured billions into the company. Volkswagen, Goldman Sachs, and other major backers have begun writing down their investments as Northvolt’s valuation crashed from $12 billion to zero.
In January 2025, Northvolt sold its remaining stakes in Hydrovolt, its battery recycler division, to Norsk Hydro for $6.79M as part of restructuring efforts. However, even after securing $245 million in new financing during bankruptcy, including $100 million from key customer Scania, Northvolt failed to meet the financial conditions needed to continue operating.
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