The recent bankruptcy of Northvolt, Europe’s leading electric vehicle (EV) battery startup, has dealt a significant blow to the continent’s ambitions to establish a self-sufficient battery industry. This setback has sparked debates about Europe’s ability to compete with Chinese battery manufacturers and whether more investment is needed to attract and support local startups.
Northvolt’s Struggles and Bankruptcy Filing
On Thursday, Northvolt filed for US Chapter 11 bankruptcy protection after failing to secure new funding. Talks with investors, including Volkswagen and Goldman Sachs, to secure additional financial support fell through.
The company, which has received more than $10 billion in equity, debt, and public financing since its founding in 2016, is now seeking $1.0–$1.2 billion in new funds as part of its restructuring process.
Despite these efforts, Northvolt has been unable to meet its production targets. It has also struggled with scaling up its operations to meet customer demands. In June, the company lost a €2 billion ($2.1 billion) contract with BMW, which further highlighted its financial instability.
Also read: Ample Secures $25M Investment from Mitsubishi to Expand EV Battery-Swapping
Europe’s Battery Industry Struggles to Compete with China
Northvolt was once seen as Europe’s best hope to challenge China’s dominance in the global battery market. However, China controls 85% of global battery cell production, according to data from the International Energy Agency. Europe’s battery industry is struggling to catch up as growth in electric vehicle demand has been slower than expected.
Many European startups, including Northvolt, had hoped to capitalize on the shift from internal combustion engine vehicles to electric cars. Yet, several companies have faced challenges in scaling up battery production.
Also read: NatWest Group issues first electric vehicle green bond, raising €750 million
Andy Palmer, founder of Palmer Automotive, pointed out that batteries are difficult to manufacture at scale and that Northvolt has failed to meet its customers’ supply demands. He added that China is far ahead in battery technology, estimating a 10-year technological gap between China and the West.
Declining Battery Projects in Europe
Northvolt’s financial struggles reflect broader difficulties in Europe’s battery manufacturing sector. In 2024, Europe’s battery pipeline capacity for the next decade has decreased by 176 gigawatt-hours, according to data from Benchmark Minerals. This loss represents nearly all of Europe’s current installed battery capacity.
At least eight companies have postponed or canceled EV battery projects in Europe this year. This includes companies like Svolt, a Chinese battery maker, and ACC, a joint venture between Stellantis and Mercedes-Benz. With fewer battery projects moving forward, Europe risks falling further behind in the race to power the electric vehicle market.
The Path Forward for Europe’s Battery Industry
As Europe faces a challenging road ahead, industry experts are questioning whether enough is being done to nurture local battery startups and attract investment. The failure of Northvolt highlights the difficulties of scaling production and competing with China, which continues to lead in EV battery production.
To close the gap, Europe will need to ramp up efforts to create a more supportive environment for battery manufacturers. This includes securing investment, improving production technology, and ensuring that startups can meet the growing demand for electric vehicles. Without these steps, Europe’s battery industry may struggle to keep pace with China and the rapidly growing EV market.
