Northvolt chief warns of turbulence in battery market

The chief executive of Northvolt, one of Europe’s largest battery makers, has warned that rising costs and logistical challenges are combining to create a more turbulent market for start-ups trying to break into the market.

Peter Carlsson, co-founder and head of Northvolt, said that although demand for electric vehicles was proving resilient in the face of a slowing global economy, executing on ambitious plans was becoming more difficult.

“Commodity prices, logistic challenges, longer lead times, increasing construction prices have also led to bigger executional challenges,” he said. “You need to be nimble and fast in order to manoeuvre in this market.

“I think it’s a bit turbulent because on one side, the demand side and pressure to continue driving the transformation is incredibly high,” said Carlsson.

The assessment by Carlsson comes as the Swedish company raised $1.1bn via a convertible bond, attracting investors including Baillie Gifford, Goldman Sachs Asset Management and Volkswagen Group.

Northvolt, which was launched in 2017, maintained its $12bn valuation in the latest fundraising, according to people familiar with the matter, a contrast to the lower valuations that a series of privately owned fintechs have had to stomach when raising money this year.

The convertible bond takes to almost $8bn the total that Northvolt has raised in equity and debt. Rival battery start-ups in Europe have raised about $8.3bn in the past decade between them, according to data provider Dealogic.

Northvolt last year became the first European company to produce a battery cell at its gigafactory in Skellefteå in northern Sweden, a milestone as it seeks to grab a share of a market dominated by Asian battery makers such as CATL, LG Chem and Panasonic.

The Swedish group plans to build three gigafactories in Sweden and Germany, as well as a cathode manufacturing plant and a recycling facility. It has won $55bn of orders from automakers including BMW, Scania, Volvo Cars and Volkswagen.

“We’re going from a phase where we were doing project-by-project financing to a continuous financing that determines how much leeway and how many projects can we do in parallel based on the availability of capital,” Carlsson said.

The company is planning to list on public markets “eventually” to help fund its ambitions, said Carlsson, but it would only make sense in the next few years if the IPO market recovered.

Carlsson’s optimism over the resilience of demand for electric vehicles is in contrast to a cautious note last month from Carlos Tavares, chief executive of Stellantis, who predicted a global recession could weaken appetite for electric vehicles.