Northvolt Cuts 20% Workforce Amid Weak EV Demand, Chinese Rivals

Northvolt has announced a significant downsizing, cutting 1,600 jobs — about 20% of its workforce — as it faces growing difficulties in scaling up production amidst faltering demand for electric vehicles (EVs) and increasing competition from Chinese battery makers. 

Northvolt confirmed the suspension of its planned expansion at its main facility in Skellefteå, Sweden, which was initially designed to boost battery cell production from 16 GWh to 30 GWh. The Swedish battery giant, which had previously raised over US$15 billion from investors including Volkswagen, BMW, and Siemens, is now struggling to maintain its financial health.

"For someone who has worked so hard for so many years to build things up, a day like this is difficult. However, it’s essential that we take this step to reduce our cash needs and refocus our investments on core operations," Peter Carlsson, CEO and co-founder, Northvolt told the Financial Times.

The job cuts will predominantly affect Northvolt's operations in Sweden, with 1,000 positions in Skellefteå, 400 at its research facility in Västerås, and 200 at its Stockholm headquarters being eliminated. The company currently employs around 7,100 people globally, with 6,400 based in Sweden.

Despite Northvolt's efforts to ramp up production, its output has remained far below expectations. The factory in Skellefteå, which was expected to produce enough batteries to power over a million cars annually at full capacity (60 GWh), has struggled to reach even 1 GWh in production, far short of the required volume to meet customer demands. 

The company’s production challenges have already led to significant contract cancellations, with BMW pulling a US$2 billion order earlier this year due to delays and quality issues. Volkswagen and Scania, both major customers of Northvolt, have also experienced delivery setbacks.

"We have tripled our production since the start of the year, reaching 60,000 battery cells per week, but that’s still well below what we need to achieve in the long term," Carlsson noted in a public statement.

While the European Union has been aggressive in its push for electrification, stricter emissions regulations, and the phasing out of internal combustion engines, demand for EVs has not grown as rapidly as anticipated. According to data from the International Energy Agency (IEA), China continues to dominate the global battery market, accounting for 85% of total production.

Sweden’s Prime Minister has ruled out any state-backed rescue for Northvolt, reinforcing the government's stance that private companies must manage their own financial difficulties. 

"We are in an intense dialogue with investors, who are asking for a clearer path to profitability," Carlsson stated. He also mentioned that the focus would remain on ensuring that Northvolt's existing operations in Skellefteå continue to ramp up.

"Many of our members are worried about their future, with their dreams of long-term stability now in jeopardy,” said Marie Nilsson, Head, IF Metall, Sweden's largest trade union. She also expressed concerns over the layoffs, describing the situation as "a dark day for Skellefteå and Västerås."

In addition to financial challenges, Northvolt has been plagued by operational difficulties. In one recent incident, Swedish media reported that the company had accidentally leaked toxic chemicals near the Arctic Circle, where one of its facilities is located. Northvolt has since denied these allegations, stating that the plant was designed to withstand the extreme weather conditions of the region and that no such leak had occurred.