Brussels: When it was founded in 2016, Northvolt was hailed as European electric automakers' best shot at reducing their dependence on Asian battery giants. Now, the Swedish battery maker is liquidating its assets in the US after a similar move in its home nation a few weeks ago - a blow to Europe's future in the global electric vehicle market and its broader ambitions to become carbon neutral by 2050.

According to Anadolu Agency, while its Swedish bankruptcy trustee has reportedly struck a deal with some stakeholders to keep the company running, Northvolt will retain only a fraction of the 5,000 staff it employed in 2023. Despite backing from the European Investment Bank, Germany, and Canada, as well as Volkswagen's 21% stake and billions in orders from European automakers, financial troubles have plagued the firm as it pursued the lofty goal of making 'the world's greenest battery.' In 2023, it reported a surge in net losses totaling $1.2 billion, while output fell far short of its 16 gigawatt-hours (GWh) capacity.

This prompted investors to re-evaluate funding for an array of new and costly 'gigafactories' - massive complexes covering most of the stages of EV battery production, from processing raw materials to recycling finished power cells at the end of their lifespan. Its main facility was in Skelleftea, a small town in northern Sweden. For its continued operation, Northvolt needed $1 billion in additional financing. When it failed to secure this, it had no choice but to declare bankruptcy.

Shivangee Chauhan, a battery analyst at consultancy Benchmark Mineral Intelligence, said that while Northvolt had begun manufacturing cells before its collapse, scaling up production proved more difficult than expected. 'They were producing cells at their site, but it was just ramping up that production, which did not prove to be as easy,' she told Anadolu. 'They were supposed to have 16 GWh of production and they were planning to hit around 1 GWh of total production last year. In terms of percentage that's really low.'

A slowdown in European demand, a shortage of skilled labor to operate imported production machinery, and a lack of cooperation with more established companies on know-how and knowledge transfer all compounded Northvolt's problems. Furthermore, the strategy of vertical integration became more of a weakness than an advantage for Northvolt as a newcomer to an industry where many competitors had over a decade of experience and vast financial resources.

Julia Poliscanova of the advocacy group Transport and Environment agrees. 'They maybe tried to run before they could walk,' said Poliscanova, senior director of vehicles and e-mobility at the campaign and research group. 'Rather than focusing first on really excelling and commercializing just the cell manufacturing . they tried to do different things, battery components, like cathodes, for example, (and) recycling.'

But beyond the case-specific challenges Northvolt has faced, Poliscanova highlighted broader issues with EU policy on EV batteries that are affecting other European companies as well. 'There is a more structural issue in Europe where we do not have the expertise to actually scale manufacturing at the quality required. It's really the commercialization where we are struggling and where policy needs to come in to support,' she explained.

When contacted by Anadolu, European Commission spokesperson Olof Gill reaffirmed that the EU 'fully stands by our ambitions for the European battery industry,' while acknowledging challenges including 'high energy prices' and 'unfair global competition.' Gill noted that the commission plans to allocate pound 1.8 billion (about $1.98 billion) over the next two years to support companies manufacturing batteries in the EU under its Innovation Fund.

Poliscanova argues that the commission's support does not go far enough. 'We have a completely wrong policy framework in Europe that doesn't help companies like Northvolt,' she asserted. 'Northvolt is doing something no one else in Europe has done before. We have no expertise doing this, so it's normal that we will take time to learn and to fail.'

Some countries, particularly China, are today enjoying the fruits of their policies, dominating the global EV battery market. Last month, the International Energy Agency reported that three-quarters of batteries sold worldwide are manufactured in China, where average prices are over 30% lower than those in Europe and continue to drop thanks to decades of support and investment throughout the supply chain.

According to a recent policy paper from the European Policy Center (EPC), rising trade tensions with the US mean China is likely to direct its overcapacity ever more strongly towards the EU market, only increasing the pressure. Vasileios Rizos, head of sustainable resources and circular economy at the Centre for European Policy Studies, emphasized that Beijing's dominance in the battery industry is not accidental.

While Europe has enacted ambitious regulations, he said, these have yet to translate into large-scale industrial success, with the region's complex bureaucratic hurdles slowing progress. 'Sometimes we have lengthy administrative processes for building a new production plant . the processes are too lengthy and too administrative,' he added.

On the Northvolt experience, Rizos believes represents a good example of an investment in Europe in battery manufacturing. While the challenges that the once-promising company has faced highlight the need for 'caution in Europe regarding our future battery development,' its collapse does not spell the end to the continent's 'plans and our strategic objectives to invest in battery manufacturing,' he said.

'I think there's still a very big, very high commitment from policymakers in Europe to support . building further this industry in Europe.'