Why Northvolt failed to become Europe’s battery champion
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In february twenty seventeen, the fis nordic embleton correspondent Richard mille is just getting back into the swing of things after a vacation, and he starts going through his inbox to catch up on what he's miss.

Well, there was a way I got a email from a contact telling me about this interesting new company.

The name of the company doesn't really stand out, but their pitch does.

IT had a terrible name at that time. S G F energy. Nobody had written about IT, but IT was run by these two european who used to work for tesla. So they were looking to be the first european company to build a bigger factory, which is basically just a giant factory that makes battery ous.

Asia is leading the global battery industry at the time, but this little sweeter start up .

wants to change that. So that big pitch was to be the Green european alternative to the so the dominant asian battery players. You know, this is something that european industry needed that didn't have.

I was both skeptical and intrigued. So I got in touch. I ended up speaking to them, and I basically wrote the first article about what became no thought.

So S G, F energy IT now has a new name, north fault, Richard. So tell me, in that pitch, how would you say that turned out?

Well, in twenty twenty four, it's kind of completely gone off the rails, the fighting for survival, all sorts of problems. So is going not so well.

I make hello, ton da from the financial times. North was supposed to be europe's battery champion. Now the companies fAllen into bankrupcy today on behind the money. How did north ful lose its charge?

When my colleague Richard writes his first story about this little sweeter start up called north al in twenty seventeen, this idea of the Green transition is well underway. Part of that includes moving away from carbon dioxide spewing combustion engines and over two electric powered cars. And with that shift, europe's auto industry seems like a cop at risk of falling behind.

The car industry is absolutely central to the european economy. There's thirteen thirteen million jobs directly and indirectly based on the car industry. And it's undergoing this sort of gut watching shift to electric cars.

At the heart of the electric car is the battery. But at the time, as I mentioned, companies in asia, the ones controlling .

this market, japan um you had catl in uh china you had the likes of LG and samsung g and korea. I think there's a feeling that if europe lets the asian companies dominate too much, then they can take over everything. So not just batteries, but they take over the whole car industry. If that was to Carry through, then the thinking goes that the, you know, the european car industry could travel dramatically. It's crucial to get a beach head really against the asian players who are otherwise dominant in the field.

Early on, after hearing about north, Richard gets the chance to interview the company, CEO Peter carlson, who appears to have euro's answer to this battery dilema .

back in twenty seventeen. He told me, if if nobody does anything, europe is gonna be completely dependent on the asia's supply chain. Europe poses the opportunity to act for its own energy independence. He said. It's now or never.

Peter carlson tells Richard that he has a big plan in mind to compete with the asian players. He wants to raise four billion dollars to set up europe's first battery factory somewhere in scandinavia.

What seems like it's gonna. Their big problem is financing. You know, four billion dollars for an unknown company, sort of straight off the bat is enormous. I me, most startups start with a few million here and do something in a few million more. But north is building a very complicated factory that needs a lot of machinery, needs a lot of talent. And it's a machinery that is very, very costly to CoOperate until you get to a certain scale where you make enough batteries that you're suddenly profitable. So north, that needed to kind of go all in from the beginning, but they had some pretty impressive names almost from the start.

Their roster of both debt equity investors becomes a whose who of industry and finance in europe.

I start to get a lot of financial investors like 1 sx uncredited， S A B J P Morgan, dr. Bank city north also secures .

investment in another way, companies it'll become their future customers. That's car makers like folkswriter in bmw. They sign on with the company to be both investors and to promise to buy north volt batteries from them in the future.

And it's cool. I think it's just the idea that the Green transition is this huge opportunity. It's can require enormous amount of capital, but IT could provide big returns for investors. So when interest rate to low, which they are in twenty, seventeen and eight thousand and twenty, you know, this looks like a pretty good bet for a lot of these players.

In late december of twenty twenty one, after years of fun raising in building north that hits a major milestone, the company announced that they've become the first homegrown startup to design and produce battery inside a gig of factory in europe.

And this was a big moment. I mean, they've shown that they could do IT on the finance side. Now they were showing that they could actually do IT Operation ally. This was the first sign that, you know, may be be they'd be able to compete with the asians.

Just a few weeks later, Richard decide to go see for himself what's happening at the gig of factory in sweden. And he has kind of a long journey I had to him.

So I first went to who left you the main factory in january twenty twenty two. I thought I had to go check that out for myself, took the plane to stock home. And then another plane up to who left you.

Who left you? Is this remote sleep down being pretty down on its luck for decades really, until north vote came cooling and obvious you land, it's pretty dam cold. Among the drive from the airport into the town and then to the factory itself was pretty hair raising, very icy.

You kind of go through this dense, very nordic, very swedish forest, just trees upon trees upon trees, and with snow on the ground, and then kind of rising out. The rising is was like this alien spaceship there, covering hundreds of football pictures. Basically, there's very flat White factory, and it's one of the biggest factory areas i've ever been to.

North had selected this remote town near the arctic circle because there's this huge amount of abundant clean energy in the form of hydropower nearby. Setting up there would help with the company's pitch that their batteries would be the Greenest in the world. And once which you got up to this alien spaceship factory, he spent some time inside.

walking around inside the factories is just this absolute behaves of activity. There are machines running, the machines being installed. There are things that being constructed.

I mean, I still covered going on. So you got people wondering, round in mask some sort, also looking like aliens almost in their space suits to avoid the batteries being contaminated. And what they told me they were aiming for that time was to produce enough batteries to para million cars a year.

So things are looking good. They've hit the smile stone, you know, creating the first battery in europe made by a european started up. But now it's time to tackle the real chAllenge, Operate its scale and deliver batteries to these customers who are relying on them like B, M, W. And volksraad on.

And they see going to be ticking the box one by one. But the hurdles at the same time are getting bigger and bigger. And the one they've still gotten get over is the toole's one. And it's executing is producing a lot of battery .

ies in the months after Richard's visit to the giga factory. The good news kinder just keeps rolling in. They are raising even more money.

They are on their way to becoming european's best funded start up. I am. They're setting their sites on expanding even more.

Pretty soon, they decide to build a second factory and sweden in a joint venture with vovo cars. They want to build the third factory in germany and a fourth factory in canada. At the same time, we've got a energy storage factory in poland.

They've got a recycling joint venture with he drove of norway, so just got the disease number of projects that they're trying to do. I think there was a sense that IT was china almost run before IT could walk in a lot of areas all that wants and you know, IT kept on thing I thought I could do IT. Um and I think, you know, that was probably because they just got so much money. But I always remember thinking like how can you keep these plates spinning in .

the air after so much positive news in north volt earliest years later, in twenty twenty three things at north hold, take a tragic turn.

November.

there's an explosion .

on the production line in the north vote factory in november, and a month later, a twenty five year old north employee dies from the severe burns that he sustained in that. And separately, a construction worker dies in a crane accident at the factory.

It's a dark time for north ful, and that leads to problems down the line with their output.

They have to stop production in left deal, and that causes issues with their deliveries. You get truck maker in sweden, scania, complaining that the not getting enough batteries IT doesn't stop .

there though more news time to their production output comes out months later. In the summer of this year, they're losing a key partner.

a bmw. The german luxury y comm ker was one of the first customers for north volt. They had a two billion dollar contractor or get batteries for one of their model.

They cancel that contract. They give IT to an asian supplier. And the alarm bell not to ring louder for north, vote you. This is a customer saying we don't think we can get enough batteries on time from north fault. So we're looking elsewhere.

Remember, its massive factory in sweden should be able to turn out batteries for hundreds of thousands of cars. But in reality, north is only producing a tiny fraction of that. Richard tells me it's more like one percent of their total capacity. Plus there is a broader issue.

You've got the backdrop of weak kish demand for electric vehicles in the europe worse than expected sales. So investors are starting to get jittery over the Green transition as a whole, and they're worrying whether nor falk can do IT because, yes, they've raised lots of money, but it's still the issue for years as being can they execute? Can they make enough batteries? And there are growing signs that they can't make enough batteries. So this kind of starts snowboarding pretty quickly.

In late early this year, Richard gets a chance to interview north hold CEO Peter carson again. Remember the first time they spoke? Carlson said that it's now never for europe to seize this opportunity and develop its own energy independence.

So there were a lot of questions in the air of the the bm w announcement about what this meant for north vote. So we get on a cool with him. And you know, we talk about some of the issues. We talk about the worker's deaths and how serious that is. He tells me that he's still confident that north vote can compete with asian battery makers.

We we need to prove that we can match them in execution.

And kind of a nowhere he announced is the no food is undertaking this strategic review.

And that's also why we are also doing a kindo is a radic overview of our business plan and and our growth plan and and the different time lines to make sure that the core engine or left o is getting all focus to get up and running before we take the next step.

A strategic review that's Normally a code word for selling things or shutting things down. And he basically hints that the expansion of no fault. So these extra factories in canada and germany could be put on hold and they're going to look at the whole business on what they do with that.

This strategic review quickly turns into a lot of action.

The headlines are that they cut a quarter of their jobs in sweden, which is where they have pretty much all their jobs. They focus almost everything on their existing factory, and we left your a lot of the preferable businesses. So recycling and energy storage there is going to be sold or at least put on pause.

And on top of that, they were trying to raise money, billions and billions of dollars or a sort of Normal fund raising package. And through this process, that becomes a kind of rescue package that they need. And that sum of money sort of gets cut in cut in cut.

Investors seem to work at backing them. And you got the swedish government saying that they're not going na rescue them. And so suddenly they really are fighting for their survival.

North al is on the ropes. They're trying to raise money, but investors are so interested, especially given how demand for evs .

has lumped europe's .

great hope in the battery. Race is running at a juice. And this leaves Richard with a bunch of questions. He wants to know exactly what happened here, what was going on inside the company that LED all these problems.

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From twenty twenty three into twenty twenty four, Richards watching the slew of bad headlines coming out of north volt, but IT wasn't really clear to him what was happening behind the scenes.

I'd written and lots of other people had written a sort of it's gone wrong for no fault, this is terrible news for europe. But what I felt was missing was a story from inside the company as to what actually had gone wrong. And so I, in a couple of colleagues at the F. T, started digging in and started trying to find past impression employees from no vote.

Richard says it's a pretty difficult process to find these sources. North told its employees not to talk to the media.

but through a sort of variety of methods, we managed to speak to ten workers, past and present. And you know, there was a pretty current picture IT wasn't like there was one single issue that had flared no fauld. There was a sense, absolutely. You know, as I kind of feared for a long time, that north road was trying to do too much, too quickly.

those sources telerate or that the company's problems fell into a few buckets, and they all played a role in the company's inability to make batteries at the scale their customers and investors were counting on from them.

The first of these would be incompetent management that no fault, hired, you know, a lot of people. And at the midnight ranks in particular, they didn't really know enough what they were doing.

as you can probably guess. Well, whole ef tio might have been a town that was rich in hydro power. IT wasn't exactly teaming with experts in battery manufacturing.

So the very top level, really its japanese or korean battery engineers, but then there are thousands and thousands of other positions and you know not much experience in europe with that. So you're hiring a lot of kind of middle managers who maybe have factory experience or maybe able to motive experience, but not the sort of deep battle experience of the asians. The second issue was the poor safety standards. Now, you know, this came to air with the tragic deaths in twenty twenty three, but some of the tails were told with pretty hair raising .

north itself is said that the accident level is comparable to other industrial companies, but it's still not where they wanted to be.

A third issue would be that I eventually learned that a lot of these machines they saw when I taught north walks factory back in twenty twenty two had actually come from chinese or south korean companies for north works, quite reliant. So you could say maybe even over reliant on that machinery in some of the main machines that they use, needed a lot of chinese and korean engineers to be on site to install and to Operate them. And they seem to be there for very long time. Having workers .

who spoke different languages made IT tough to communicate, even simple things.

There were a couple of specific incidents that were mentioned to do with the chinese workers. In one case, non chinese workers were in A A drive room in a factory when a fire alarm went on and they didn't hear IT and a chinese worker had to come in and using google translate, said, you know this a fire alarm going on.

Now the chinese company involved, uchi says that is Normal in a ramper face that they have engineers on on site to Operate the machinery. But quite a few of the employees found that quite striking. And then the fourth issue was, I guess you could call the misuse of capital, that this was a company that kind of had so much money that wasn't what was constraining IT.

So IT was burning through cash unnecessarily. IT was paying too much to suppliers to get things done today where IT could have half the bill if I had waited a week or something that I was doing. Things one realistic tic deadlines, meat invested demands rather than doing IT properly.

Welcome to nose for press conference. Now I will hang the conference over to CEO and cofounder Peter Carol. Go .

ahead.

Hi everybody. I'm sorry.

In late november, north ford announced that he was filing for bankrupcy in the U. S. The company had deaths of five point eight billion dollars and just thirty million dollars in cash, enough to support its Operations for about one more week. The next day, Richard attends a press conference held by the company on the all, carson tells journalist that he would be resigning.

that, uh, I in in the company step down as C O. And maintain my my role at in the board supporting also the uh the company that is like a baby for me in any capacity that I I can I mean.

this is big news, right? Coulson says on the call himself, north vote is his baby. He's the one that formed IT and now he can see the sort of dreams he had potentially dying in front of him and he asked, take responsibility for that.

The next question comes from Richard mile from financial time. Please go ahead .

a morning, Peter. Um first all may be a big one, backward looking in your words, what has gone wrong?

Yeah you know obviously i've been a reflection uh A A lot of about um the last uh year and eighteen month in hindside. We build a very, very conference sive colson later .

went on to say, was a, you know, not one thing that went wrong, IT was a combination of factors. He's said things like there were thousands of workers from one hundred different nationalities is IT was a very remote location that was difficult to attract people to, was trouble in getting the new processes right. Uh, they had the covered nineteen affecting the construction, and they were the first western customers of chinese and korean equipment makers, which meant they had all sorts of teething problems on the machines.

We should probably ask you that probably have full that the great earlier on some of the the expansion haps.

Richard, what is next for north ful? I mean, what happens to the company now that they filed for this reorganization?

So chapter eleven bankrupcy is Normally not the end for a company. I mean, it's is it's a chance of a new beginning. No vote said they wanna find up to one point two billion dollars to be able to exit chapter. So they're looking for a new investor or new investors to give them that money and to try and make the dream live again. The question is, if they couldn't find that in the last few months as they are gna be able to find IT now.

So what happened? City investors who already put so much into this, you know, i'm thinking of firms like golden sacks or the car companies spoke wagon.

So like in most bankrupts, if you're an equity investor, if your shareholder, you're probably gonna get wiped out or near enough wiped out by this.

Now, the F, T, I broke this story, goldman sex, which lets remembers the second largest investor in no thought, they send a letter to investors in their funds and said, by the end of this year we're writing down the value of our north investments to zero um and they've got about nine hundred million dollars of investment and you know for other investors IT can be a similar tale but the problem I guess overall is that a lot of big name investors have put quite a bit of money into north fold. This was one of the stars of the Green transition in europe. And most, if not all, of that money is now gone.

What does this mean for the future of battery making an electric vehicles in europe? Can another company ever try this again? Has a pop in spoil?

No, thought was the pioneer. IT was pretty long way ahead of everybody else. What you left with now in europe is a lot of decent size battery companies that are more connected with a single car maker.

So vox wagon has a battery make called power co. Uh, reno has one called vehicle. And maybe that's the way that it's gonna a develop. But I think working in the background is this sense um do the european car makers, do european policymakers still want to have a european battery industry? Or do they throw in the town and leave IT to the chinese, leave IT to the japanese, koreans? I think you know, right now, the jury is probably a bit out, but I think it's still too crucial for them to give up entirely. It's just that maybe we're looking at more the european players carving out a little niche for themselves in the asian players having the kind of mass market of this.

Now Richard, as someone who's reported on north al for something like seven years, what if you weren't I mean.

one thing is the risky investments of risky investment. I mean, that is hard to build. Something completely new.

IT involves a huge amount of hard work, a huge amount of money. And even then you're not sure it's gonna come off. And that was the case here.

I mean, I want to stay optimistic for europe's behalf, but it's pretty easy when you look at what happened to north vote to get sort of quite pessimistic. You've got the U. S.

In china, which are huge domestic markets. Europe sa struggles on that front. And you know, so a company like north vote got a lot right.

I got its financing right, you know, had ambitious plans, but I didn't get the execution right. And that is a problem for europe. Now lets hope that somebody else can fill that gap. Maybe north folk can come back from chapter eleven to fill that gap on its own, but at the moment IT looks a little bleak.

Behind the money is hosted by me, Michelle in dia, Sophia ethmoid is our producer, sound design in mixing by C M G of ino and Joseph sell eto toper four has is our executive producer. Shao gramley is the global head of audio. Original music is by hand is Brown. Thanks for listening the next week.

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