What Can We Learn From Swedish Battery Manufacturer Northvolt’s Bankruptcy?

Written by: Louis Chenot

Edited by: Sonja Colford

On November 21st 2024, Swedish battery manufacturer Northvolt filed for bankruptcy with US$5.8 billion in debts and just enough cash to operate for another week (Mannes & Mannes, 2025). The unexpected collapse sent shockwaves throughout the green energy industry and has caused many to doubt whether Europe can truly become a world leader in the green transition. However, the strategic and technical shortcomings of Northvolt, and the failure of the Swedish government to protect the company from a competitive global market, are useful lessons on how governments around the world can play an important and active role in supporting burgeoning high-tech industries. While technical factors certainly played an important part in the company’s collapse, it is also clear that government failure at several levels starved the company of crucial early-stage protection and funding. To learn from this, governments must take both accountability for their failures as well as responsibility for industrial policy. 

First we have to understand exactly what went wrong. In Northvolt’s early days, no signs hinted at the technical and logistical failures that eventually paralyzed the company. After securing a loan of €350 million from the European Investment Bank in 2019 (European Investment Bank, 2020), the company attracted €1 billion in investment from major players in the automotive industry such as BMW and Volksvagen (Milne, 2019). The construction of their first battery plant was completed in 2021 (Northvolt, 2021), transforming the sleepy northern Swedish town of Skellefteå into a hub of green technology. The location in Northern Sweden – dubbed the ‘Nordic Silicon Valley’ (Aagaard et al., 2022) for its concentration of high tech industries and industrial know-how – was ideal. It blended regional talent with abundant hydro and wind power to create an efficient, renewable-powered battery plant (Savage, 2025). Many now fear that future investment in the region will be stymied by Northvolt’s bankruptcy. 

Indeed, shortly after beginning production, the firm struggled to keep up with the immense scale of battery production in China in the face of challenging global macroeconomic headwinds and a lack of government support. Firms in China have been heavily supported by the Chinese government since the industry took off over a decade ago. In contrast, the Swedish government has deflected responsibility for the failure and refused to invest in or bail out the company, with the minister for Energy, Business and Industry arguing for more European Union (EU) intervention and saying Northvolt’s bankruptcy is “not a Swedish crisis” (Nyheter, 2024). Unfortunately, she’s right, to an extent. Broader technical issues plagued the company from the start. According to a Porsche report, new battery technology is being developed faster than startups can handle (Porsche Consulting, 2024). Having to constantly remake your equipment and industrial processes is expensive, especially for smaller firms with less capital. Combined with the fact that new vehicle technology is rapidly outpacing new battery technology, small firms with an insufficient labour force have struggled to constantly reconcile battery design with the changing needs of new designs. Broader EU collaboration is also lacking, though. A more coordinated continental strategy could take advantage of the natural abundance of low-carbon wind and hydro power found in Nordic countries, and the skilled workforce found in industrial nations such as Germany.

But the minister’s comments obscure the important role national governments can play in protecting and promoting nascent startups, especially in the field of green tech. To avoid scaling up at unsustainably fast rates to become cost competitive with established players, governments can offer subsidies and implement tariffs to shield new companies from the global market until they are sufficiently established. National governments also have the power and resources to invest in education, generating a highly-skilled workforce of engineers, environmental scientists, and researchers to populate Sweden’s ‘Nordic Silicon Valley’.

However, it could also be true that the West must swallow its pride and learn from China’s successes. Taking advantage of cheap Chinese equipment and technology could be a strong foundation upon which the West can build to develop a cost advantage. Starting from scratch, like Northvolt attempted to do, is unlikely to achieve profitability on the time-scales needed for the climate transition. Only time will tell which strategy will pay off for Europe, but it is clear that a radical change in approach is needed – one that sees governments actively investing in and incubating new green tech companies. 

By implementing bold industrial strategies and putting in place financial support, governments can build more sustainable and efficient societies that are competitive in an increasingly cutthroat global economy. In the absence of sufficient investment from the private sector, governments must be decisive in taking action and leading the green transition.

_________________________________________________________________

References:

Aagaard, P., Andersen, J., Dahlqvist, F., & Nauclér, T. (2022, September 1). Playing offense to create Nordic sustainability champions. McKinsey & Company. https://www.mckinsey.com/capabilities/sustainability/our-insights/playing-offense-to-create-nordic-sustainability-champions

European Investment Bank. (2020, June 26). Swedish company gives jolt of energy for electric car battery tech. https://www.eib.org/en/stories/electric-car-battery-technology

Mannes, M., & Mannes, M. (2025, January 8). Northvolt owners vote to stay operating while seeking financial rescue. Reuters. https://www.reuters.com/business/northvolt-remain-operation-while-seeking-financial-rescue-2025-01-08/

Milne, R. (2019, June 12). VW and Goldman lead $1bn investment in Swedish battery project. Financial Times.

Northvolt. (2021, December 29). Northvolt Ett assembles first lithium-ion battery cell. https://northvolt.com/articles/first-cell/

Nyheter, S. V. T. (2024, November 28). Ebba Busch (KD) om Northvolts överlevnad: ”Inte bara en svensk angelägenhet”. SVT Nyheter. https://www.svt.se/nyheter/lokalt/vasterbotten/ebba-busch-kd-om-northvolts-overlevnad-inte-bara-en-svensk-angelagenhet

Porsche Consulting. (2024). Gigafactories, Giga-Challenges. https://www.porsche-consulting.com/international/en/publication/gigafactories-giga-challenges

Savage, M. (2025, January 2). Sweden’s green industry hopes hit by Northvolt woes. BBC. https://www.bbc.com/news/articles/crrwqpdv5q7o