Swedish battery startup Northvolt secured a $5 billion debt deal earlier this week, paving the way for the expansion of its first gigafactory as Europe seeks to solidify its home-grown battery manufacturing base.
Northvolt is hoping to become a rare success story in the industry: a battery manufacturing startup that survives. If the company manages to deliver on its plans, it’ll catapult itself and the continent into the top ranks of battery producers.
It’s not an easy path. Outside of China, none of the major battery producers are startups; they’re either spinoffs or subsidiaries of existing industrial juggernauts. Even China’s leading battery companies, CATL and BYD, are related to existing manufacturers, and all of them have benefited from generous state subsidies and industrial policies.
Northvolt’s $5 billion loan won’t be enough to guarantee success, but it should be enough to help ramp up its production to a targeted 60 gigawatt hours, enough for over 1 million Volkswagen ID.3s, Europe’s best-selling, non-Tesla EV. The company said it has offtake contracts totaling over $55 billion with automakers, including BMW, Volkswagen, Volvo and Scania.
The new loan includes the refinancing of an existing $1.6 billion debt facility from 2020. Northvolt said the debt package was provided by the European Investment Bank and the Nordic Investment Bank. JPMorgan Chase, Citigroup, and BNP Paribas also provided a portion of the financing, the Wall Street Journal reported.
Northvolt is also building factories in Germany and Montreal, the latter of which is meant to attract production tax credits in the U.S., offered by the Inflation Reduction Act (IRA).