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Northvolt Faces Major Setback with BMW Contract Cancellation Due to High Production Waste

Northvolt, the Swedish battery manufacturer, is grappling with significant challenges after BMW canceled a $2 billion battery cell contract due to Northvolt’s inability to meet delivery timelines.

The cancellation is a considerable blow to the fledgling company, which has been producing battery cells in Skellefteå, Sweden, since late 2022. However, despite over a year and a half of production, high levels of waste have kept production costs elevated and delivery volumes below expectations.

BMW’s immediate need for prismatic cells for its current models, including the iX, i4, and i5, cannot be met by Northvolt. Additionally, BMW’s transition to cylindrical cells for its upcoming Neue Klasse electric cars renders any delayed deliveries unfeasible.

Northvolt’s inability to fulfill the agreed quantities has forced BMW to look elsewhere, a move that underscores the gravity of the production issues at Northvolt.

Other prominent clients, such as Scania and Porsche, also rely on Northvolt for their battery cells. Scania needs the cells for its heavy-duty electric trucks, while Porsche has planned to use Northvolt cells for the upcoming battery-electric versions of the 718 Boxster and Cayman. The repercussions of BMW’s contract cancellation are prompting Northvolt to reassess its expansion strategies.

In an interview with the Swedish business newspaper Dagens Industri, Northvolt co-founder and CEO Peter Carlsson acknowledged the company’s overly ambitious expansion plans.

“We were a little too aggressive with our expansion plan and we are now reviewing this,” Carlsson stated. A Northvolt spokesperson confirmed to several media outlets that the company is evaluating the timing of further ramp-ups at its factories, focusing on stabilizing production at its Skellefteå Gigafactory.

The implications of this review for other planned factories are still unclear. However, Northvolt has reaffirmed its commitment to the factory under construction in Saint-Basile-le-Grand, Quebec.

A spokesperson emphasized the company’s intent to contribute to Quebec’s energy transition by manufacturing eco-friendly batteries. Yet, there may be adjustments to the products, production volumes, or schedules once operations commence.

In Germany, Northvolt is also scrutinizing the timeline for its Heide factory in Schleswig-Holstein. Initially slated to produce its first cells in 2026, the Heide factory’s schedule might be influenced by the need to meet BMW’s requirements.

Meanwhile, no official statement has been made regarding the proposed factory in Gothenburg, Sweden, which is planned in collaboration with Volvo.

Financially, Northvolt is under significant pressure, having tripled its losses to approximately $1.2 billion in 2023. The company must continue investing to rectify the production problems in Sweden and build new factories while facing intense competition from cheaper Asian battery cell manufacturers.

Carlsson highlighted the necessity of focusing on core business operations, aiming for a 25% market share in Europe by the end of the decade.

Compounding Northvolt’s woes, Volvo is also facing challenges with its new EX30 compact electric SUV. Software issues have plagued the vehicle, leading to some customers in the UK returning their cars.

Problems range from unresponsive screens and steering wheel buttons to malfunctioning emergency braking systems and incorrect infotainment displays. Despite these issues, Volvo continues to sell the EX30, promising swift resolutions and positive customer support.

These setbacks for Northvolt and Volvo underscore the critical need for swift and effective problem-solving to maintain momentum in the EV revolution. With billions of dollars at stake, the pressure on these companies to resolve their issues is immense.

 

This article was created using automation technology and was thoroughly edited and fact-checked by one of our editorial staff members

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