Northvolt raises $1.1bn as Volkswagen breaks ground on battery cell gigafactory

Business news |
By Nick Flaherty

Northvolt has raised another $1.1bn (€1.1bn) to expand battery cell and cathode material production in Europe as VW breaks ground on its first battery cell Gigafactory.

NorthVolt’s Gigafactory in Ett, the first native production plant in Europe, started volume production in May after five years of development and investment of $7.1bn as the first of five gigafactories in the region.

This comes as partner VolksWagen broke ground on its own battery cell Gigafactory at Salzgitter, the first of six in Europe. The company is investing $20bn in its own ‘Powerco’ to produce batteries starting in 2025 alongside its joint venture plant with Northvolt. This is key to having a European supply chain for battery cells, packs and modules for electric vehicles.

“The battery cell business is one of the cornerstones of our NEW AUTO strategy which will make Volkswagen a leading provider of the sustainable, software-driven mobility of tomorrow,” said Herbert Diess, CEO of Volkswagen. “Establishing our own cell factory is a megaproject in technical and economic terms. It shows that we are bringing the leading-edge technology of the future to Germany.”

The Volkswagen Group is bundling its global battery activities into a European company it calls PowerCo. This will  manage international factory operations, the further development of cell technology, the vertical integration of the value chain and the supply of machinery and equipment to the factories. Further products such as major storage systems for the energy grid are planned.

Following Salzgitter, the next cell factory is to be established at Valencia. Sites are currently being identified for three further cell factories in Europe. In addition to Europe, PowerCo is also already exploring the possibility of further gigafactories in North America.

“In building our first in-house cell factory, we are consistently implementing our technology roadmap. PowerCo will become a global battery player,” said Thomas Schmall, Member of the Board of Management of Volkswagen responsible for Technology and Supervisory Board Chairman of PowerCo. “The company’s major strength will be vertical integration from raw materials and the cell right through to recycling. In future, we will handle all the relevant activities in-house and will gain a strategic competitive advantage in the race to take the lead in e-mobility. We have secured a top team for this great undertaking.”

Investors in NorthVolt’s capital raise were AMF, AP funds 1-4, ATP, Ava Investors, Baillie Gifford, Compagnia di San Paolo through Fondaco Growth, Folksam Group, Goldman Sachs Asset Management, IMAS Foundation, Olympia Group, OMERS Capital Markets, PCS Holding, Swedbank Robur, TM Capital and Volkswagen Group.

The company is developing manufacturing capacity to deliver on $55 billion in orders from key customers, including BMW, Fluence, Scania, Volvo Cars, and Volkswagen Group.

For decades, the global lithium-ion battery industry has been dominated by a small collection of Chinese, Japanese and Korean companies. The Gigafactory at Ett makes NorthVolt the first homegrown Tier One automotive battery supplier.

A key aspect of the company strategy involves establishing in-house competences and presence throughout the battery value chain, including cathode material production and recycling. Through its large-scale recycling program, Northvolt intends to enable 50% of its raw material requirements to be sourced from recycled batteries by 2030.

“The combination of political decision making, customers committing even more firmly to the transition to electric vehicles, and a very rapid rise in consumer demand for cleaner products, has created a perfect storm for electrification,” said Peter Carlsson, CEO.

Through 2021, around 1,800 people were recruited into Northvolt, and it continues to onboard around 150 people per month to support its plans. Key projects of the company include the continuous ramp up and expansion of Northvolt Ett, as well as the establishment of the Northvolt Volvo Cars joint venture gigafactory in Gothenburg, Sweden, and its third gigafactory, Northvolt Drei, in Heide, Germany. In parallel, a cathode factory, Northvolt Fem, is being established in Borlänge, Sweden.

With one production block online today and additional ones being brought online, Northvolt Ett will ramp to a total capacity of 60 GWh – a supply of cells sufficient to power some one million electric vehicles per year.

“With commercial deliveries commencing in Q2 2022, Benchmark has upgraded Northvolt to Benchmark Tier 1 status of lithium-ion battery cell producers for the automotive industry,” said Caspar Rawles, Chief Data Officer at Benchmark. “Benchmark assigns each producer into three tiers based our three Qs: quality, quantity and qualification. Northvolt’s addition means the industry now has nine tier one lithium-ion battery producers.”

Key to developing cells to meet customer specifications has been Northvolt Labs in Västerås, Sweden. Serving in its role as a platform for cell industrialization for over two years now, it is at Northvolt Labs where cells now being produced in northern Sweden were designed, developed and validated in collaboration with our customers.

Life Cycle Assessment indicates that cells produced at Northvolt Ett will carry a carbon footprint which is approximately one third that of a comparable industry reference cell at 33kg CO2e/kWh compared to 98kg. This major reduction is largely the result of Northvolt Ett being powered with a supply of 100% hydropower and wind power but the company is aiming to reduce this to 10kg CO2e/kWh by 2030.;

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