Volkswagen invests another €500Mn in Northvolt

Volkswagen is investing another 620 million dollars, or about half a billion euros, in its battery cell partner Northvolt. The funding is part of a $2.75 billion private placement that the Swedish company announced today alongside news on production capacity increases.

Volkswagen’s investment will ensure that the carmaker maintains its Northvolt share at 20 per cent. Other existing investors include Goldman Sachs. Newly on board are AP funds 1-4, via the co-owned company, 4 to 1 Investments, and OMERS, one of Canada’s largest defined benefit pension plans.

Including the latest funding, Northvolt says it has now raised more than 6.5 billion dollars (5.3Bn euros) and remains on an expansion course leading up to and beyond 150 GWh of annual battery cell production capacity in Europe by 2030.

Concrete plans include expanding the Northvolt Ett ‘Gigafactory’ in Skellefteå, northern Sweden, from 40 GWh of annual production capacity to 60 GWh in response to higher customer demand. Capacity stands at 14 GWh, and production will commence later this year.

Currently, demand is in excess of $27 billion worth of contracts from “key customers,” says Northvolt. Among them is, of course, Volkswagen, which placed a $14-billion order when presenting its uniform battery cells at the Power Day this March. Reports suggested that Northvolt may produce exclusively for the VW Group at the first facility in Sweden. In today’s news, Volkswagen and Northvolt said that production of these cells is due to start in 2023, and the annual capacity intended for Volkswagen is to be built up in stages to as much as 40 GWh.

This leaves 20 GWh for other clients such as BMW, Scania and Fluence, with the recently-announced expansion of production capacity to 60 GWh. BMW reportedly expects Northvolt to supply cells manufactured in Skellefteå worth two billion euros starting in 2024, one year after Volkswagen.

A German facility with Volkswagen is already under construction in Salzgitter as ‘Northvolt Zwei’ however, with VW at the helm. While the project had started jointly, Northvolt later announced it would sell its shares in the cell production facility in Salzgitter to VW in March. “As the Volkswagen Group plans to increase its own battery production in Europe, Northvolt will sell its share in the Northvolt Zwei joint venture in Salzgitter to Volkswagen,” Northvolt wrote in March. The German publication WirtschaftsWoche assumed the decision had been driven by Volkswagen at the time, as the Group found progress going too slowly. Insiders suggested Volkswagen had concluded that the young Swedish company was overburdened with the simultaneous construction of a factory in Sweden and would be better off concentrating on one.

Volkswagen also confirmed plans for six battery cell factories in Europe by 2030 today; only this time said that it expects to commission these together with its partners to safeguard the ramp-up of electric vehicle production. “After Skellefteå and Salzgitter, possible locations and partners for the next cell factories are already being considered,” reads the statement.

Battery recycling as the other part to increase output

Regardless of Volkswagen, Northvolt foresees “tremendous growth” in other parts of the European value chain for battery manufacturing by 2030. Northvolt aims at 150 GWh capacity by that time and further anticipates building at least two more gigafactories in Europe over the coming decade. The company said it was “actively exploring the opportunity of building the next of these in Germany” but did not specify where.

“This is a new European industry in the making, and it will require significant investments over the coming decade. It is encouraging to see that the investor community has identified the opportunity early, and we hope to see more investments throughout the value chain over the coming years,” said Alexander Hartman, CFO of Northvolt.

Apart from making new battery cells, Northvolt aims to establish recycling capabilities that will enable 50 per cent of all its raw material requirements to be sourced from recycled batteries by 2030. Immediate plans include the Revolt recycling programme announced in December 2019. Northvolt wants to build the first recycling plant next to the actual Ett battery cell factory in Skellefteå. With an initial capacity of 4 GWh, the company hopes that the plant will be the largest in the world and the only large-scale plant in Europe that can recycle lithium in addition to cobalt, nickel, manganese, and other metals.

At the time, Peter Carlsson, Co-Founder and CEO of Northvolt, saw the company “in the middle of a race to establish manufacturing capacity in Europe. Today he added, “We have a solid base of world-class investors and customers on-board who share Northvolt’s mission of building the world’s greenest battery to enable the European transition to renewable energy.”

Goldman Sachs and Morgan Stanley acted as financial advisors to Northvolt. Also participating in the current equity raise are current owners AMF, ATP, Baillie Gifford, Baron Capital Group, Bridford Investments Limited, Compagnia di San Paolo through Fondaco Growth, Cristina Stenbeck, Daniel Ek, IMAS Foundation, EIT InnoEnergy, Norrsken VC, PCS Holding, Scania and Stena Metall Finans.


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