Northvolt’s Funding Travails Hit Battery Projects from Germany to Canada

Northvolt AB’s difficulties are causing headaches far beyond its home base in Sweden, where taxpayer-backed electric vehicle battery projects face delays stretching from Germany to Canada.

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(Bloomberg) — Northvolt AB’s difficulties are causing headaches far beyond its home base in Sweden, where taxpayer-backed electric vehicle battery projects face delays stretching from Germany to Canada.

A giant €5 billion ($5.5 billion) factory the manufacturer is building in northern Germany is likely to open six to 12 months later than its 2026 target, according to people familiar with the matter.

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Cell production at Northvolt’s site in Canada, expected to begin in the third quarter of 2026, will require more time, people familiar with the project said separately. Construction timelines and increased production are likely to be extended, delaying large quantities by more than a year, the sources said.

Cathode-making and recycling initiatives that are also part of the C$7 billion ($5.2 billion) first phase in Quebec will be delayed further while the company reviews its ambitions, the people said, asking not to be identified with the changing plans.

A Northvolt spokesman said it remains committed to the German and Canadian projects and is in close dialogue with key stakeholders, adding that no decisions have been made.

The widely felt ripple effects of Northvolt’s sudden cash crunch have led to governments as far as Sweden being criticized for not properly assessing the risks of allocating billions to electric car suppliers’ projects. While major shareholders have pledged support, the company’s mission to take on more established Chinese and Korean players is far from safe.

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“Almost all European battery startups have overpromised and capitalized on the hype,” said Sam Adham, head of battery materials at consultancy CRU. “It is possible that Europe can reach those levels, but it all boils down to the know-how” that the region cannot match at the moment.

Politicians who threw their support behind Northvolt now find themselves on the defensive.

The plant in Heide, called Northvolt Drei, has been hailed as a symbol of Germany’s commitment to the green energy transition and the domestic battery supply chain for carmakers such as Volkswagen AG, Northvolt’s largest investor. Its 60 gigawatt-hour capacity will produce batteries that power up to 1 million electric cars annually.

The federal and regional governments allocated €902 million to the project, mostly in grants, and Chancellor Olaf Scholz attended the groundbreaking in March alongside Economy Minister Robert Habeck, who hails from the region.

Just four months ago, Habeck urged Northvolt to open a second mega-factory in Germany to help its green campaign. He said last week that his government is in constant contact with the company.

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Any delay at the German plant would likely be embarrassing for Schulz’s beleaguered coalition government.

The sources said that Berlin is still reluctant to provide more money, and is pressuring Sweden to do more if necessary.

An Economy Ministry spokeswoman said German support for the project in Heide was “unwavering” and that its financing commitment was not affected by growing problems at Northvolt’s main Swedish plant.

The cost of building the Northvolt Drei has increased by €1 billion since it was announced in March 2022, and the timeline has dropped to 2026 from the original plan of late 2025.

Sweden said last month that it would not grant any emergency loans to help Northvolt overcome its cash crunch, and ruled out taking a stake.

BMW AG will also not help finance Northvolt after canceling a €2 billion battery order earlier this year, Bloomberg reported this week. Volkswagen said it would support Northvolt’s industrial expansion but did not provide details.

Canada Pledge

Canadian officials have pledged the equivalent of C$7.3 billion ($5.4 billion) in loans, equity stakes and subsidies to Northvolt.

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Much of that comes from the federal government, though the first payments won’t begin until after those expenses are incurred and reviewed, the people said. Quebec has already lent more than a third of its C$1.37 billion capital commitment for the Northvolt Six project being built near Montreal.

Now Northvolt is at the center of political debate in the French-speaking region. Many are concerned that taxpayers’ money will now be lost. The cash crunch comes after a year of disputes over whether Northvolt should get a bypass of the environmental assessment process to facilitate rapid construction.

“I understand that people are concerned,” Canadian Industry Minister Francois-Philippe Champagne said last week, seeking to reassure the public. “For Northvolt, profitability comes through the North American market, and the Quebec plant is key to its future.”

A large portion of the C$7.3 billion available to Northvolt comes in the form of manufacturing subsidies based on battery production. Their phase-out begins in 2030 and ends completely at the end of 2032. This means there is a financial incentive for Northvolt to accelerate production in Canada as quickly as possible, otherwise it will lose the benefits of its deal.

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Scale again

Northvolt is racing to shore up its finances, which are affected in part by an inability to access loan commitments worth at least $1.5 billion. Plant performance achievements tied to some government funding are another potential barrier to accessing cash.

The company said last week it was making “significant progress” towards raising new funding, while its CEO and founder pledged to invest more. A group of major lenders have met in parallel to consider how to move forward.

Meanwhile, Northvolt lowered its moat. On September 23, the company announced widespread layoffs and said it would scale back many of its projects to focus on increasing battery production at its main factory in Sweden, near the Arctic Circle.

The company also said it remains committed to a battery manufacturing joint venture with Volvo Car AB in Gothenburg that went live in March.

“Establishing a huge factory will require a lot of trial and error,” consultant Adham said. “It’s a high-capital, low-margin business.”

—With assistance from Jonas Ekblom and Rafaela Lindberg.

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