The Rise and Fall of Northvolt: Lessons from Sweden's Ambitious Battery Project
Northvolt, the Swedish megaproject that was expected to lead Europe's electric vehicle battery market, is facing bankruptcy in early 2025. Founded in 2016 by former Tesla executive Peter Carlson, the company got off to a flying start, attracting a total of €8 billion in investment from Volkswagen, BMW, and others, but production disruptions, cost overruns, and technology shortages eventually led to bankruptcy.
Facility investment costs that were twice as high as originally planned, a low factory utilization rate of just 45%, and product unit costs that were 32% higher than those of Chinese competitors contributed to the company's quick demise. With 4,200 direct jobs and 15,000 indirect jobs at risk, the story provides an important lesson in how over-optimism and failure to manage risk can have a significant social cost.
Adding my observation over years because I know several families who have migrated from South Korea after working at LG Energy Solution and Samsung SDI, two Korean battery producers known as global top 3 in its industry, and I was able to recognize internal organizational and cultural abonormality, communicational conflict, and management issues that were not mentioned in the press or media then.
There were families who wanted to settle down and build another career dream for themselves and their families with company support, but they couldn't find the vision anymore and had already left, especially for a Korean battery or semiconductor company in the U.S. They thought that because the U.S. had the greater infrastructure and culture with its English-speaking and Korean community than Sweden, the moving back could bring them more opportunities than here.
The small city of Skellefteå, where the factory is being built, is a very desolate little town with skyrocketing housing and apartment prices. Over years, there was an influx of business and jobs, and the government was actively attracting people to the area to help alleviate unemployment in big cities like Stockholm. In fact, there weren't enough people to work for the jobs, so companies here were offering to hire people if they could sort out their own housing.
However, the current reality is that businesses are laying off workers to survive. The living conditions of tech workers and their families, who have migrated from Japan, Korea, India, China, and elsewhere, are suffering, and the local economy is struggling.
From the beginning, many wondered why Sweden would build such a mega factory in the far north of Sweden, a region with no population, no infrastructure, bitter cold, and no experience in the battery industry and manufacturing. The idea of powering electric vehicles with all-natural batteries, using natural electricity such as hydropower to produce batteries without the use of fossil fuels, was an idealistic goal. This vision attracted a lot of investment, and the company aggressively recruited people with experience from battery manufaturing companies in South Korea, Japan, and China, as well as from all over Europe, building a mosaic of mega-projects in various locations.
In this article, after my personal observation and insight, I analyzed the reasons for Northvolt's failure and its alternative way, and identify key lessons for future industrial projects to take an attention.
I think this is a classic case worthy of a case study in Haevard Business Review (HBR), which I used a lot in my MBA program in Boston, MA, USA, many years ago. Again, it is for my own insight into the case with personal network in it.
Executive Summary:
Northvolt, once hailed as Sweden's electric battery giant, aimed to revolutionize the European battery industry, providing sustainable solutions for the rapidly growing electric vehicle (EV) market. Established in 2016 with the mission of creating large-scale, green lithium-ion batteries, Northvolt attracted significant investments and public attention. However, by 2025, the company faces severe financial turmoil, including the threat of bankruptcy. This case study analyzes the internal factors contributing to Northvolt's crisis, explores the economic, social, and regional impacts, and draws valuable lessons from the company's journey.
Problem Statement:
Northvolt, despite initial success, is in deep financial trouble and on the brink of bankruptcy. The core issues lie in mismanagement, production delays, and financial missteps, which have led to significant cost overruns and missed market opportunities. The company's inability to effectively manage its rapid scaling and address market challenges has caused it to lose investor confidence and face mounting operational challenges.
Background Information:
Northvolt was founded in 2016 by former Tesla executive Peter Carlsson and Paolo Cerruti with the ambition of establishing Europe’s largest producer of lithium-ion batteries. With a goal to challenge Asian dominance in the EV battery sector, Northvolt initially raised substantial capital. The company was able to secure over $6 billion in investments, including a notable $1 billion from Volkswagen and a €350 million investment from the Swedish government, positioning itself as a future cornerstone of Europe's green energy transition.
The company’s mission was clear: to build the world's greenest battery, using sustainable and locally sourced materials, and to ensure that Europe would not remain reliant on Asian suppliers for critical electric vehicle components. By 2021, Northvolt began constructing its gigafactories in Sweden, with the first expected to go live in 2023.
Data Analysis:
Several key factors have contributed to Northvolt's downfall:
Production Delays and Quality Issues: Northvolt faced significant production delays in delivering its batteries at the scale promised. Despite initial success in securing pre-orders, manufacturing setbacks, including supply chain bottlenecks and technology integration issues, caused delays. As of 2025, only a fraction of the expected output has been realized.
Cost Overruns: Initial projections for building the gigafactories were off by a significant margin. The cost of the facilities ballooned to nearly $10 billion, far exceeding original estimates. This mismanagement of resources and failure to scale efficiently has put immense financial pressure on the company.
Supply Chain Failures: Northvolt’s dependency on critical materials such as lithium and cobalt exposed vulnerabilities in its supply chain. The company failed to secure long-term contracts with mining companies, leading to fluctuating raw material prices and shortages that disrupted production.
Leadership and Strategic Failures: Northvolt's leadership struggled to scale the company in a sustainable manner. Decisions were often made under pressure to meet ambitious goals, leading to over-promising and under-delivering. Additionally, the company’s hiring practices and management structures were not agile enough to handle the fast-paced demands of the growing market.
Alternatives Evaluation:
Several strategies could have been employed to prevent Northvolt's current crisis:
More Conservative Scaling: Northvolt could have taken a more gradual approach to scaling up production, focusing on steady growth rather than aggressive expansion. By securing reliable suppliers and streamlining operations, the company might have avoided the significant delays and cost overruns.
Improved Risk Management: By investing in better risk management strategies, particularly regarding its supply chain and raw material acquisition, Northvolt could have safeguarded against market fluctuations and ensured production stability.
Stronger Leadership and Operational Focus: More experienced leadership with a focus on operational excellence and cost control could have helped the company manage its expansion more efficiently. Better governance structures would have enabled faster decision-making and more responsive actions to industry challenges.
Social, Economic, and Regional Impacts:
The downfall of Northvolt has broader consequences for Sweden and Europe:
Economic Impact: The collapse of Northvolt would lead to massive financial losses for investors, including Volkswagen and Swedish taxpayers. This could destabilize the European EV industry, which is heavily reliant on battery production.
Regional Impact: The company’s headquarters and factories in Sweden were expected to be major job creators. The shutdown of Northvolt would result in widespread layoffs and negatively affect local economies, particularly in regions dependent on the green energy sector.
Social Impact: The failure could reduce consumer confidence in European green technologies and hurt the push for sustainable energy transitions. Local communities might also experience a loss of pride and a sense of purpose tied to the company’s ambitions.
Conclusion : Lessons and Takeaways
Over-Promising and Under-Delivering: Setting overly ambitious goals without a clear path to execution is a recipe for failure. Northvolt’s promises of rapid scaling led to investor overconfidence and unmet expectations.
Risk Management is Key: Effective risk management, particularly in supply chains, can prevent catastrophic operational disruptions. It’s crucial to mitigate risks in areas like raw materials and logistics to avoid significant cost overruns.
Leadership and Adaptability Matter: A strong leadership team capable of adapting to changing market conditions is vital for a startup's success. Northvolt’s inability to adjust quickly to production challenges and its lack of strategic flexibility were major factors in its downfall.
Sources:
- Financial Times (2025), “Northvolt Struggles Amid Production Delays and Rising Costs.”
- The Guardian (2025), “Electric Battery Startup Northvolt Faces Insolvency Threat.”
- Bloomberg (2024), “Northvolt’s Supply Chain Struggles and Rising Costs Put It at Risk of Bankruptcy.”
- Swedish Government’s Investment Reports (2024), “Government Support for Green Energy Companies.”
