Northvolt's Struggle: From Electrifying Green Ambitions to a Liquidity Crisis, and the Road Ahead

Northvolt’s rise was fueled by a vision of creating not just an efficient battery manufacturer, but the European green battery champion—a company that would help Europe reduce its dependence on China for critical technologies. Politically supported and celebrated as a symbol of European sovereignty in green energy, Northvolt was burdened by a combination of ambition and ego. This drive, while admirable, contributed to its undoing.

Three key factors explain Northvolt's current crisis:

1. Ego and Political Overreach: Northvolt’s aspiration to be more than a battery manufacturer—to be a geopolitical savior for Europe—placed excessive political and market expectations on the company.

2. Megaproject Syndrome and Time Pressure: The company’s simultaneous pursuit of multiple projects, under immense pressure to deliver on promises to stakeholders, strained its operational bandwidth. Problems such as reliance on Chinese equipment and delays in recycling processes further exacerbated the situation.

3. Management Challenges: Founder Peter Carlsson’s emotional attachment to Northvolt, treating it as his “baby,” hampered effective decision-making and communication. These leadership challenges compounded competence gaps and operational inefficiencies.

   
   

   [Connolly, Wikner, 2024]

A Vision Misaligned with Financial Realities

Northvolt’s mission was undeniably groundbreaking. The company aimed to produce batteries with the lowest possible carbon footprint while integrating recycling into its operations. Yet, as its 2023 annual report reveals, the financial structure to support this endeavor was fragile. With $15 billion in funding and an order book exceeding $50 billion, Northvolt seemed well-positioned. However, rapid expansion drove not just massive capital expenditures (CapEx), but also significant working capital requirements. By 2023, working capital investments ballooned to over $300 million—2.5 times its annual revenue of $128 million. This imbalance placed severe strain on the company’s liquidity ​[Northvolt, 2024].

Northvolt’s reliance on loans for long-term financing further amplified its vulnerability. Without sufficient equity or quasi-equity buffers, the company struggled to weather delays and cost overruns in its ambitious projects.

Strategic Shortcomings in Planning and Execution

A deeper look at Northvolt’s financial and operational decisions reveals insufficient scenario planning and an overestimation of its ramp-up capabilities. For instance, while the company had planned to meet tight production deadlines for partners like BMW, it failed to deliver, leading to the automaker canceling its deal. This not only damaged Northvolt’s reputation but also highlighted a critical gap in its ability to align promises with performance [Wikipedia, 2025].

Furthermore, Northvolt’s ambitious goal to present a restructuring plan by Q1 2025 raises concerns. While demonstrating urgency, this timeline appears overly optimistic and risks repeating the same mistakes of underestimating complexity and time. Hastily formed plans often lack the depth required to address fundamental issues, leading to further unsustainable propositions.

The Cost of Green Values and Stakeholder Discord

Northvolt’s commitment to sustainability came with trade-offs. These efforts increased production costs, extended payback periods, and lowered profitability. While its green mission resonated with public and private stakeholders, Northvolt’s failure to manage relationships effectively caused friction. Disputes over timelines and unpaid obligations (e.g., tax authorities) highlighted the growing mistrust among stakeholders. This environment of discord became a catalyst for the current crisis.

Comparisons and Lessons from Other Cases

Northvolt’s trajectory draws parallels to major restructuring and insolvency cases.

• WeWork serves as a stark reminder of how investors and lenders can be captivated by sky-high expansion plans. Like Northvolt, WeWork’s narrative centered on revolutionary ambitions—transforming office spaces rather than energy storage—but fell into crisis due to overexpansion and unsustainable financial strategies. [Knauth, 2024]

• SolarWorld AG, a German solar panel manufacturer, offers a closer parallel. Like Northvolt, SolarWorld aimed to challenge Chinese dominance in a critical industry but struggled with high costs, government dependency, and an inability to compete on price and scale. Its insolvency in 2017 highlighted the dangers of combining political expectations with insufficient operational resilience. [Wettengel, 2017]

• Evergrande Group, the Chinese real estate giant, provides another cautionary tale. Its liquidity crisis, stemming from overleveraged expansion into ambitious projects, mirrors Northvolt’s reliance on debt and insufficient equity buffers to support its growth trajectory. [China Business Law Journal, 2024]

Northvolt can learn from these examples, especially in navigating stakeholder expectations, managing timelines, and avoiding overreliance on debt-fueled growth.

Signs of Hope: External Expertise

A positive sign in Northvolt’s Chapter 11 process is its engagement of Teneo and Rothschild as restructuring advisors. Teneo, having acquired Deloitte Restructuring in the UK, brings deep expertise in navigating complex insolvencies. Rothschild, renowned for its high-stakes financing deals, has a proven track record of balancing competing interests—a skill I have witnessed firsthand. Their involvement demonstrates that Northvolt is seeking professional, independent guidance, which is critical for its recovery.

Lessons for the Future

1. Manage Ego and Align Ambitions with Realities A company’s vision must balance ambition with operational feasibility. For Northvolt, the push to be a geopolitical savior led to promises and timelines that were overly ambitious. Setting realistic goals aligned with operational capacity is critical for long-term success.

2. Plan for Liquidity from Day One With working capital requirements exceeding revenue, liquidity management must be prioritized. Tools like a 13-week rolling cash flow forecast, implemented early and consistently, could have provided early warnings and mitigated the liquidity crunch.

3. Collaborate with Stakeholders and Use Independent Oversight Northvolt’s decision to involve Teneo and Rothschild is a step in the right direction. These advisors can ensure the restructuring plan is grounded in financial and operational realities while maintaining trust among stakeholders.

4. Focus on Communication and Competence at the Top Leadership must evolve with the company. Founders should recognize when it’s time to transition from personal attachment to professional management, prioritizing competence and efficient communication over emotional ties.

The Road Ahead

Northvolt’s Chapter 11 filing, while a setback, is also an opportunity for recalibration. With its state-of-the-art facilities, a strong order book, and its pioneering vision, Northvolt retains significant potential. However, the success of its recovery hinges on whether its restructuring plan can truly address the root causes of its financial distress, rather than merely patching symptoms.

By drawing on lessons from other high-profile insolvencies and leveraging the expertise of Teneo and Rothschild, Northvolt can rebuild trust, refine its strategy, and emerge stronger. The journey ahead is fraught with challenges, but Northvolt’s story can still transform into one of resilience and renewal.

References:

1. China Business Law Journal. ‘Enough is enough’ as HK court orders Evergrande to liquidate. 2024. 31 January.  Available at: https://law.asia/hk-court-orders-evergrande-liquidation/ (Accessed: 11 January 2025)

2. Connolly P., Wikner A. The Northvolt saga – how the battery bubble burst. Norran, 2024. 25 November. Available at: https://www.norran.se/english/skelleftea/artikel/inside-northvolts-mess-busted-tech-and-management-missteps/l6go29ej (Accessed: 11 January 2025).

3. Knauth D. WeWork cleared to exit bankruptcy and slash $4 billion in debt. Reuters, 2024. 30 May. Available at: https://www.reuters.com/legal/wework-cleared-exit-bankruptcy-slash-4-billion-debt-court-says-2024-05-30/ (Accessed: 11 January 2025)

4. Lagerström K. Lista: Tre möjliga scenarion för Northvolt framåt. SVT Nyheter. Available at: https://www.svt.se/nyheter/lokalt/vasterbotten/lista-tre-mojliga-scenarion-for-northvolt-framat (Accessed: 11 January 2025).

5. Northvolt. Sustainability and Annual Report 2023. Northvolt, 2024. Available at: https://www.datocms-assets.com/38709/1719998824-northvolt_sustainability_and_annual_report_2023.pdf (Accessed: 11 January 2025)

6. Wettengel J. Last major German solar cell maker surrenders to Chinese competition. Clean Energy Wire, 2017. 11 May. Available at: https://www.cleanenergywire.org/news/last-major-german-solar-cell-maker-surrenders-chinese-competition (Accessed: 11 January 2025)

7. Wikipedia. Northvolt. Wikipedia, 2025. 7 January. Available at: https://en.wikipedia.org/wiki/Northvolt (Accessed: 11 January 2025).