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Volvo Cars wants to buy struggling Northvolt out of their joint venture to build a battery factory in Gothenburg in a move underscoring the challenges facing European carmakers and suppliers in the transition to electric vehicles.
The Swedish carmaker, owned by China’s Geely, said on Wednesday that it planned to invoke its redemption rights to take full ownership of Novo Energy from its current 50-50 partner Northvolt as the battery group had not “fulfilled its financing obligations”.
Northvolt, which is fighting to raise a rescue package in the coming days, said it had decided not to contribute more capital to Novo Energy and instead focus its funding on its sole current factory in Skellefteå in northern Sweden, where it has struggled to ramp up production.
The expensive shift to electric vehicles and the rise of lower-cost Chinese competitors is roiling the European car industry. Volvo has already abandoned plans to sell only electric cars by the end of the decade while Northvolt is fighting for survival after burning through cash in its stuttering attempts to make batteries.
Volvo and Northvolt announced plans to build a gigafactory together to great fanfare in 2021 with production due to begin in 2026.
But both companies have struggled with their plans this year. Northvolt has said it is cutting a quarter of its Swedish workforce and scaling back all other activities to focus on its Skellefteå plant. It has yet to spell out what this means for the Volvo joint venture or two further factories due to be built in Germany and Canada, but executives have heavily hinted both would be delayed.
It is racing to pull together a rescue package, reported to be about €300mn, by next week to give it financial breathing room. It said on Wednesday that it remained in “active and constructive dialogue” with Volvo on the future of Novo. Insiders said that if Volvo wanted to take full ownership, it would have to buy out Northvolt, which could help with its financing issues but would not be connected to the rescue package.
Volvo itself has been hit by the slowdown in electric car sales spreading to the premium segment. Last week, the company slashed its sales guidance as well as saying that it would not invest in Northvolt’s rescue.
The Gothenburg-based carmaker said that “any battery production at Novo Energy is dependent on third-party or other partner involvement” but gave no indication as to whether it is in talks with other companies about taking on the factory. It added that the factory was “multifunctional” and that various, unspecified options were being considered for its future use.
Volvo stressed that it had a “diversified and resilient battery supply chain” and that its electric car rollout would not be affected.
Experts said that should Volvo want to keep Novo Energy as a battery factory, only Asian manufacturers such as China’s CATL, Japan’s Panasonic or South Korea’s LG were currently able to make cells.
Volvo said it was “too early” to say whether its new partner would be Chinese, adding that the company was reviewing several options.