Electric vehicles

Europe’s top battery maker has $6 billion—and a plan to scale rapidly

Northvolt plans to build three new Europe-based gigafactories by 2025.
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Northvolt

· 6 min read

By the end of the decade, Europe could be the world’s second-biggest producer of batteries—and a Swedish startup called Northvolt may be key to its potential rise.

Although founded only six years ago, Northvolt is the leading European battery maker. The company announced three new battery facilities in the first quarter of 2022, including a 60 gigawatt-hour (GWh) battery plant in the northern region of Germany in March. In Sweden, Northvolt plans to build a 50 GWh facility that will supply EV battery cells to Volvo and Polestar and convert a paper mill into a manufacturing plant for cathode active materials and battery cells. So far, it’s raised $6 billion to realize its plans.

All three gigafactories are expected to begin operations by the end of 2025, and manufacturing would ramp up in the years after, bringing Northvolt’s total potential battery production capacity to more than 170 GWh—enough to power at least 1.5 million EVs per year.

Global electric-vehicle sales more than doubled in 2021, and EVs could make up the majority of new cars sold in Europe as soon as 2025, according to a study by Element Energy. That will likely add up to ~6 million new EV sales annually in the region.

We spoke with Jesper Wigardt, vice president of communications and public affairs at Northvolt, about the company’s strategy for growth and the challenges of building out a battery supply chain in Europe.

This conversation has been edited for length and clarity.

What do these recent announcements mean for Northvolt’s efforts to scale, and for Europe’s ability to meet the growing demand for EV batteries?

We’re in the middle of a race for capacity. We’re seeing a market being built up pretty much from scratch, but in a maybe eight- to 10-year period of time, that window will close. The suppliers will be picked and the supply chain will be set. So it’s really now that things are happening.

Looking at it from a European point of view, we want to be a significant player by 2030. Our target is set to a 20%–25% market share in Europe by that time. Our estimation a few years back was that in order to reach that market share, we would have to build 150 GWh of annual battery capacity in Europe.

If you look at what we have announced here, over the past few months…that will take you to 150-plus [GWh], creating a pretty solid roadmap for us to work on over the coming years. We think the market is moving quickly, and customers are requiring more batteries sooner than expected. So we might have to come back and revise that figure upwards.

We’ll see some bottlenecks in this market over the coming 5–10 years, and there will likely be a situation where supply might not meet demand here, short-term. If you look at the entire value chain, we will have this problem. It will be on the cell-supply side. It will be on the raw-material side. It will be components. And it will be a little bit of a rocky road, we think, as this industry is setting up, for all these reasons.

Northvolt ETT, the company's first gigafactory

Nortvolt Ett, the company's first gigafactory. The factory produced its first cell in late December 2021. (Northvolt)

How is Northvolt thinking about raw materials as prices increase?

These past few weeks have been extraordinary. We saw nickel at $100,000 per ton. But [this] is, we think, an emotionally-driven market currently. It will stabilize long term and come down to more reasonable levels. So short term, we’re not exposed in a way causing us any harm. We’re also still fairly small-scale in our production—we’re ramping up the first gigafactory.

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Long-term, the solution is really recycling. The main difference between EVs and combustion engine cars is that when you burn gasoline or diesel in a combustion engine car, it goes up into the atmosphere and then it’s gone, right? While if you look at the battery minerals, those are recyclable by nature, and you can recycle them over and over again, which we’ve proven with our recycling technology. You’re looking at a market that’s growing almost exponentially here over the coming decades, so we will be dependent on virgin raw material for quite some time. But when you reach a one-car-in-one-car-out type market, then obviously, we could have a very circular supply of minerals here. And that is the game changer.

Battery production facilities are just one step in the process. What else is the company working on along the battery supply chain to support the planned manufacturing capacity?

What we have done from the beginning is the more vertically-integrated setup, compared to most other producers. We produce our own cathode material, we produce cells, we produce battery systems, and we also recycle these systems and cells. So we take a more holistic approach to the value chain and a more strategic approach, I would argue. It’s good from a margins point of view and it’s good from a sustainability point of view and a supply chain control point of view.

Long term, we don’t really see a problem on the mining side; it’s really on the refining side. There are findings, there are projects, but there is a limited capacity in refining of these materials if you look at nickel, lithium, cobalt, for instance. So it’s really there that we foresee the biggest bottlenecks over the years to come. And we’ve taken a step to take more of that under our own control with the lithium refinery we’re part of in Portugal, which we announced just before Christmas. And we’ll see a more strategic take on that part of the value chain as we move along as well.

Some of the raw materials Northvolt uses in its batteries. (Northvolt)

What’s the most challenging part of getting these operations online?

Our CEO typically says this is the Formula One of manufacturing. It is very, very difficult to manufacture battery cells. That is a big challenge in itself to learn how to master that.

[We work with] a lot of external partners. On the machine-building side, a lot of different partners—primarily that competency sits in Asia currently, so a lot of Asian vendors of machines. But then we have the layer of software and connectivity, where we have Siemens, ABB, etc. for automation and that sort of digitalization.

I think right now, [the bottleneck] is really competency, skills…access to talent and people with experience in this industry. At Northvolt, we [are] closing in on 3,000 employees, 110 nationalities. We have to go and look for the best people in the world, wherever they are.

So short term, that is a key challenge—finding the right people. And it’s connected to a long-term challenge for us, for Europe, and I think for the US to some extent: How can we create our own pipeline of people with the right skill sets?

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