Northvolt will lay off 20% of its workforce due to low electric vehicle sales

Northvolt, the ambitious Swedish company that was born to power European electromobility, is struggling to stay operational. When it was created, its executives projected a large cell capacity, which made many manufacturers on the continent, such as BMW or Volkswagen, bet on it.

However, it has had problems fulfilling the deliveries it had committed to. Now, it will lay off around 20% of its workforce and has put on hold the expansion of its main plant in Skelleftea, in the north of the Scandinavian country.

According to Fredrik Erixon, an analyst at the European Centre for International Political Economy, "there will not be enough demand to meet the supply of batteries and it is very likely that Northvolt will be the first victim of the market correction that is occurring."

If it disappears, so will the possibility of having a European company specialized in electric vehicle accumulators that can compete with Chinese giants CATL or BYD, whose prices have not yet been matched.

Originally, Northvolt intended to reach a production capacity of 230 GWh by 2030 among its six projected factories, enough to supply 3.8 million electric cars. Today, the Skelleftea plant has 16 GWh. However, the company "remains committed" to creating the NOVO joint venture with Volvo, as well as building two other plants in Germany and Canada.

Its disappearance would be a bitter dose of reality for the European Union's attempts to develop a self-sufficient green industry. Northvolt was one of the first companies to receive subsidies from Brussels to prevent the community industry from relocating to the US with Joe Biden's Inflation Reduction Act (IRA).

This capital injection was accompanied by orders from German companies that exceeded 55 billion euros, but its failures in delivery deadlines, as well as a decreasing appetite for electric vehicles, created a domino effect that has plunged the company into its current economic difficulties.

Its plans to go public, which would have given it a valuation of around 20 billion euros, were canceled last May. In July, they stated that their operating losses exceeded 1 billion euros and their revenues reached 130 million.

If the company ends up going bankrupt, the Swedish government has stated that it will not carry out a bailout. Germany maintains that it is "in constant contact" with the company, given its manufacturers' interest in its products – last June, BMW canceled an order worth 2 billion euros with the Swedish company.

The question arises whether the European Commission, so protective of its automotive industry as it has shown with tariffs on Chinese electric vehicles, will be as protective of the nascent battery industry and whether it will apply additional tariffs on CATL or BYD accumulators.