Lessons from Britishvolt and Northvolt: Navigating Europe's High-Stakes Battery Revolution

The collapse of Britishvolt and the recent struggles at Northvolt present a stark reminder of the challenges faced by Europe’s burgeoning battery industry, even amidst an anticipated surge in demand for electric vehicle (EV) batteries. Despite their early promise, both companies have faced significant setbacks that offer crucial lessons for investors and policymakers involved in Europe’s transition to clean energy.

Britishvolt: Overambition without a Foundation

Britishvolt collapsed in early 2023 after failing to secure sufficient investment to move forward with its ￡3.8 billion gigafactory project. The company’s downfall was driven by several key factors:

1. Lack of Concrete Deliverables: Britishvolt had yet to produce batteries at a commercial scale or secure significant orders from automakers. Its plans were ambitious, but without a proven product or a strong customer base, it struggled to attract necessary funding.
2. Unfavorable Market Conditions: The post-Brexit environment further dampened investor confidence, and the UK government’s delay in releasing promised funds compounded the issue. Unlike battery competitors in the EU and US, which were benefiting from substantial government incentives, Britishvolt was left underfunded and without the necessary public backing.
3. Premature Scaling: Britishvolt sought to build a massive gigafactory without first demonstrating the financial or operational capacity to scale production. This high-risk strategy made it vulnerable to financial troubles and ultimately led to its bankruptcy.

Northvolt: Financial Struggles Amid High Competition

Northvolt, often hailed as Europe’s battery champion, has also encountered significant problems despite its early success. In 2024, Northvolt faced a series of operational and financial challenges, forcing the company to lay off 1,600 workers and halt parts of its factory operations in northern Sweden.

Key issues facing Northvolt include:

1. Production Delays and Cancellations: Northvolt faced delays in delivering battery cells to key clients such as Scania, and recently lost a significant order from BMW, which opted to work with Samsung SDI instead. This reflects the difficulties that European battery makers face in competing with established Asian manufacturers like those in South Korea and China, which benefit from economies of scale and lower costs.
2. Oversupply and Slowing Demand: While demand for EV batteries remains high, oversupply in global battery manufacturing capacity has led to price pressures and reduced margins for companies like Northvolt. Coupled with a recent slowdown in EV adoption, this has exacerbated financial strains on battery manufacturers.
3. Safety and Operational Concerns: Northvolt has also been rocked by safety issues at its flagship plant in Skellefte?, where several work-related accidents and tragic fatalities occurred in 2023 and 2024. These incidents have prompted investigations and further complicated the company’s operations.

Lessons for European Battery Investors

1. Securing Early Partnerships: Both Britishvolt and Northvolt’s experiences underscore the importance of securing strong, early partnerships with automakers. Northvolt’s $14 billion deal with Volkswagen has been a lifeline for the company, despite its recent challenges. Investors should prioritize building long-term contracts with key customers before embarking on large-scale investments.
2. Realistic Scaling Plans: Attempting to scale too quickly, as Britishvolt did, without first proving the viability of technology and securing funding can be disastrous. Northvolt’s strategic decision to downsize and refocus on core operations is a reminder that even established players need to adjust to market conditions.
3. Government Support and Regulation: The role of government support in the battery industry cannot be underestimated. Both companies have faced difficulties accessing timely and adequate public funding. Policymakers need to ensure that strategic industries like battery production receive the necessary backing, especially in the face of stiff competition from the US and China
4. Adapting to Market Conditions: Oversupply and fluctuating demand have become significant risks in the global battery market. Investors should monitor these trends closely and be prepared to adapt their business models accordingly, focusing on niche markets or adjusting production capacity to avoid losses.

In conclusion, while the demand for EV batteries will continue to grow, the experiences of Britishvolt and Northvolt demonstrate the complexity and risks involved in building a successful battery manufacturing business. For Europe to compete globally, investors and policymakers must collaborate closely, ensuring strong partnerships, realistic growth plans, and stable public support to navigate these challenges.