Northvolt, Europe’s Hope for a Battery Champion, Files for Bankruptcy

The company’s woes are symptomatic of a wider malaise among companies that make batteries for electric vehicles.

The Swedish battery maker Northvolt, once seen as Europe’s strongest competitor to Chinese battery manufacturers, filed for bankruptcy protection in the United States on Thursday.

The company has been struggling financially for months, cutting jobs and restructuring operations. Founded in 2016 by a former Tesla executive, Northvolt said filing for Chapter 11 bankruptcy would allow it to “restructure its debt, appropriately scale the business to current customer needs and secure a sustainable foundation for continued operation.”

The company has faced a series of challenges this year. They began with accidents at a plant in Sweden and the loss of a contract with BMW worth 2 billion euros, or $2.15 billion, in June. In September, Northvolt announced plans to pause its production of cathode materials — one of the basic building blocks of a battery — at a factory in Skelleftea, Sweden.

Two planned factories in Germany and Canada are financed separately and will continue to operate outside the bankruptcy process, the company said. Northvolt’s factories in Sweden will remain open and continue to make deliveries and pay vendors and employees, the company added.

The filing was made in U.S. Bankruptcy Court for the Southern District of Texas, and the company said it expected to emerge from the process in the first quarter of next year.

“Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification,” Tom Johnstone, the company’s interim chairman, said in a statement.

Northvolt said it would gain access to new sources of funding through the bankruptcy process, including $145 million in cash. In addition, it said, one of its customers had committed to providing a $100 million loan.

The company reported a $1.2 billion loss in 2023, increasing from a $285 million loss in the previous year. Nevertheless, in January it secured financing from the European Union worth $5 billion, the largest loan from the bloc aimed at fostering green-tech industries.

Northvolt’s woes are symptomatic of a wider malaise among companies that make batteries for electric vehicles, one that bodes ill for American and European automakers trying to keep pace with new rivals from China.

Chinese battery makers like CATL and BYD have been thriving while competitors in South Korea, Japan and Europe have been struggling. The Chinese battery makers are benefiting from soaring sales of electric vehicles in China, where the technology accounts for half of new car sales. That gives Chinese battery makers a clear advantage over competitors like Northvolt, SK, LG Energy Solution, Samsung SDI and Panasonic, which are more dependent on Europe and the United States, where E.V. sales have been tepid.

Demand for battery-powered vehicles in Europe stagnated this year, growing only 1.3 percent in the first half of 2024, down from 14.6 percent in the previous year, according to the European Union.

The slump affecting battery makers underscores the extent to which China sets the tone for electric vehicle manufacturing. CATL is already the largest battery maker in the world by a wide margin.

Some people in the battery industry said it was a mistake to try to compete with Chinese manufacturers, given that they had a big head start. The Chinese government decided years ago to focus on electric vehicles and subsidized battery makers.

Investors and governments should have put their money into new battery technologies that would give them an advantage, said Celina Mikolajczak, a former Tesla executive who is the chief battery technology officer at Lyten, a Silicon Valley company that is developing batteries made using low-cost sulfur rather than costly metals like nickel and cobalt.

“If you are going to play in that industry, you have to bring something that differentiates you,” Ms. Mikolajczak said.

Battery manufacturing is exceedingly difficult. Cells must be manufactured on automated assembly lines in dust-free environments using highly processed metals and chemicals. Minor impurities can ruin batches of cells, costing companies millions. Battery factories cost billions of dollars to build, and there is a shortage of engineers with the required know-how.

“The world grossly underestimated how hard it is to make batteries,” said Gene Berdichevsky, the chief executive of Sila, a company that makes advanced battery materials. “We are going to shake out to fewer players.”

Signs had been building that Northvolt was in distress. In August, the company said it would shut down a research and development center near San Francisco and consolidate the development of next-generation batteries in Sweden. Patrik Andreasson, the chief strategy officer at Northvolt, warned that Europe and the United States risked falling behind in electric vehicle technology.

“The longer we as Europe and North America take to switch over to full battery electric vehicles, the more territory we concede to competitors, mainly out of China,” Mr. Andreasson said in an interview in August.

Rebecca F. Elliott contributed reporting.