Breaking Ranks to Survive-Northvolt Announces Business Realignment and Layoffs

On September 9^th, Northvolt formally announced new cost-cutting measures, with plans to lay off staff and de-prioritise the production of cathode materials and battery storage systems. It will also sell or suspend business units unrelated to its core business in order to get through the current difficulties. The specific measures are as follows:

1. The Upstream 1 cathode materials production facility at the Northvolt Ett gigafactory, will be put into care and maintenance until further notice. The plant will focus on cell production in the coming period.

2. the Northvolt Fem cathode material production project in Kvarnsveden will be terminated. Northvolt has concluded an agreement for the sale of the site.

3. Northvolt seeks to bring in new investors for Northvolt Dwa (battery systems and packs) in Gdansk, Poland.

4. Northvolt plans to merge its California-based subsidiary Cuberg and its lithium technology development into the Swedish Northvolt Labs.

The industry has been anticipating this realignment for some time. Since the end of 2022, the company has been producing battery cells at Northvolt Ett in Sweden. A lack of engineering experience has left the current yield rate far from expectations. This has not only resulted in huge costs but has also made the deliverable battery production insufficient to meet customer needs. Northvolt recorded a huge loss of US$1.2 billion last year, which is about 4.2 times the loss in 2022. One of Northvolt's shareholders, BMW, has cancelled billions worth of orders this year. In addition, the decline in demand for electric vehicles has also indirectly affected investors' expectations for Northvolt.

Northvolt's plans for battery cell factories in Germany and Canada have not been affected by the strategic adjustment for the time being. However, according to SMM's earlier report, Northvolt Six in Quebec, Canada, is already expected to have a delay of about 18 months. As for the German plant, Northvolt said it will release a further strategy update and decision on the German plant in the third quarter of this year.

So far this year, SMM has observed some European battery makers adjusting and cutting their investment plans. For example, Automotive Cells Company (ACC) announced in June that it was suspending the construction of its two battery plants in Germany and Italy and planning to change the design of its production lines to produce batteries based on lithium iron phosphate (LFP) technology in the future. Foreign companies are also becoming more cautious about investing in European battery plants. SVOLT Energy announced in May this year that it had cancelled plans announced in September 2022 to build the plant in Lauchhammer, Germany. The construction of its other plant in Saarland also continues to be delayed.

SMM believes that the lacklustre performance of electric vehicle sales in Europe is an important factor that makes the companies more cautious. In the first six months of this year, European EV sales grew by just 1% year-on-year, significantly behind the global average of around 20%. The other major barrier is that the lack of industrial chain support and practitioners' engineering experience for battery markers in Europe cannot be ignored. For building new lithium-ion battery production lines in Europe, mature engineering experience may be more important than advanced R&D capabilities.