Northvolt in Ashes: How Does the Phoenix Rise?

I have long wanted to write about Northvolt for my book Green to Great. Initially, I envisioned showcasing it as a success story—a shining example of Europe’s potential in green industry—but securing interviews proved elusive, perhaps understandably. Now, the narrative has shifted from triumph to cautionary tale, illuminating how quickly ambitious dreams can unravel.

Founded in 2016 by former Tesla executive Peter Carlsson, Northvolt promised to create “the world’s greenest battery,” aiming boldly to reduce Europe’s dependency on Asian imports and to “make oil history” through clean, high-capacity lithium-ion batteries. With major backing from investors such as Volkswagen and Goldman Sachs, along with robust support from the EU Battery Alliance, Northvolt quickly became emblematic of Europe’s green industrial ambitions.

Its plan was expansive: a fully integrated ecosystem of gigafactories in Sweden, Germany, and North America, supplemented by battery recycling and energy storage facilities, all powered by renewable energy. By late 2021, Northvolt celebrated its first battery cells produced at its flagship Skellefteå facility, aiming ambitiously to capture 25% of Europe’s battery market by 2030.

Yet within just a few short years, Northvolt’s vision unraveled dramatically. By late 2024, financial realities and strategic missteps had overwhelmed the once-promising company, culminating in a bankruptcy filing in Sweden by March 2025.

What Went Wrong?

Several interconnected strategic errors accelerated Northvolt’s collapse:

1. Misplaced Priorities—Electrons vs. Molecules

Northvolt placed its main gigafactory in remote northern Sweden for access to inexpensive renewable electricity. But while electrons (electricity) travel cheaply over vast distances, transporting molecules—raw materials, cathodes, and finished batteries—proved costly and logistically challenging, significantly increasing production expenses and operational complexity.

2. Operational and Financial Overreach

Underestimating the difficulty of building a gigafactory from scratch, Northvolt delivered less than 1% of its expected capacity by 2023, plagued by equipment failures, inexperienced staff, and supply-chain issues. Concurrently, its aggressive global expansion strategy rapidly drained its finances. Despite raising over $10 billion, by late 2024 the company had barely one week’s cash reserves remaining against a mountain of debt exceeding $5 billion.

3. BMW’s Strategic Pivot and Industry Realignment

BMW’s withdrawal from its Northvolt partnership went beyond frustration with production delays. It reflected a broader strategic realignment toward vertical integration—recognizing battery technology as central to automotive competitiveness. This pivot exposed the fundamental weakness of Northvolt’s standalone business model, highlighting the necessity for battery makers to integrate deeply within automotive supply chains.

4. Hubris and Regulatory Complexity

Central to Northvolt’s troubles was hubris—a European pattern of believing ambition could overcome the realities of complex industrial manufacturing. Aggressive timelines and unrealistic scaling targets were not isolated mistakes but mirrored broader miscalculations in European green energy projects, such as misplaced hydrogen infrastructure and poorly planned carbon capture initiatives. Coupled with slow-moving and complicated EU regulatory and subsidy frameworks, these ambitious but impractical approaches ultimately hindered rather than supported execution.

5. Europe’s Diesel Distraction

While European automakers—particularly Volkswagen—were occupied with preserving their leadership in diesel, even resorting to deception during the Dieselgate scandal, China strategically invested in battery technology and supply chains. By 2015, China had already developed a mature battery ecosystem, creating a dependency that Europe—and ultimately Northvolt—struggled to overcome. Europe’s fixation on diesel had distracted it precisely when the global automotive industry decisively shifted towards electrification.

Beyond Northvolt: Europe Needs More Peter Carlssons—And a System That Can Keep Up With Them

The failure of Northvolt isn’t just a business story—it’s a wake-up call for Europe. We all wanted Peter Carlsson to succeed. A homegrown Tesla-slayer, proving that Europe could lead in batteries, electrification, and the green industrial revolution. But going big in Europe is different from going big in the U.S. or China.

Northvolt didn’t fail because the idea was bad. It failed because Europe hasn’t figured out how to support industrial-scale entrepreneurship fast enough.

If we want the next Northvolt to succeed, Europe must rethink how it supports big, ambitious industrial ventures—before another great entrepreneur is lost to regulatory delays, fragmented policy, and slow capital.

1. Make Green Industrial Policy Simple, Fast, and Focused on Execution

Europe’s approach to industrial support is too complex, too slow, and too bureaucratic. ESG, CSRD, and green funding schemes require mountains of compliance before anything is even built. The IRA in the U.S. isn’t perfect, but it’s simple. Companies get tax credits and incentives fast, without endless forms and consultants.

Regulation should accelerate investment, not delay it. Instead of layering new reporting requirements on top of existing ones, European governments should focus on making industrial-scale investment as straightforward as possible. Fast-track approvals for green industries should be standard, not an exception. A battery gigafactory or a hydrogen plant should not take five years of paperwork before a shovel hits the ground.

2. Build Industrial Ecosystems, Not Isolated Projects

Northvolt’s greatest weakness was its location. Sweden offered cheap, renewable electricity, but it was far from its core customers—Europe’s automakers—and isolated from the deep supply chains that battery manufacturing depends on. The assumption that industry would move to where energy was cheapest was flawed. Energy must move to where industry already exists.

Europe should stop treating battery and hydrogen projects as isolated ventures and start embedding them within existing industrial clusters. Gigafactories should be near car plants. Hydrogen production should be near steel mills and chemical plants. Large-scale green manufacturing works best when supply chains, skilled labor, and customers are already in place.

3. Support Entrepreneurs with More Than Just Subsidies

The failure of Northvolt is not an argument against backing visionary entrepreneurs like Peter Carlsson. It’s an argument for supporting them differently. Scaling a green industrial company is not the same as building a software startup. It requires patient capital, deep partnerships, and long-term commitments from both public and private stakeholders.

Rather than scattering subsidies across individual projects, Europe should focus on long-term, risk-sharing investments that align public funding with private execution. Governments should not just hand out grants but help structure co-investment models that bring automakers, energy providers, and industrial players together from the start. Northvolt should never have been a standalone venture. It should have been a deeply integrated partnership with Europe’s auto industry.

4. Think Like an Industrial Powerhouse, Not a Regulatory Bureaucracy

The European Commission talks about building a competitive green economy, but its approach often feels more like an administrative exercise than an industrial strategy. The slow-moving policy frameworks and rigid regulatory structures create an environment where innovation is outpacing legislation.

Europe’s greatest strength has always been its ability to build world-class industrial ecosystems. The Mittelstand in Germany, the automotive clusters in Italy and France, and the aerospace industry in Toulouse did not emerge from regulation alone—they were the result of decades of collaboration, investment, and smart policy choices that enabled scale and efficiency. The next wave of green industrialization must be built the same way.

5. Politicians and Business Leaders Need a Major Upgrade on Emerging Technologies

One of the biggest obstacles to scaling the green industrial revolution isn’t just financing or regulation—it’s a knowledge gap at the highest levels of decision-making. Many policymakers and business leaders still operate with outdated mental models of energy economics and industrial strategy. Keeping up with the science and economics of emerging technologies is a full-time job, but too many of the people shaping industrial policy and investment decisions haven’t done the work.

Battery energy storage (BESS) is a perfect example. In places like Australia and California, where renewable penetration is high, real-world experience is proving that batteries can do far more than just store surplus solar and wind power. They are actively stabilizing the grid, reducing reliance on gas peaker plants, and pushing fossil fuels further out of the electricity mix. The more batteries get deployed, the clearer it becomes that gas is no longer needed as a backup for renewables—it is simply making electricity more expensive.

This year will be pivotal in demonstrating how powerful batteries really are. The scaling of BESS is allowing renewables to deliver on their full potential, not just in theory but in practice. European policymakers should be paying close attention to these developments, yet too many remain stuck in old assumptions about baseload power, dispatchable generation, and fossil fuel backup. The result is policy inertia, overly cautious grid planning, and continued dependence on gas at a time when cleaner, cheaper alternatives are proving their value elsewhere.

If Europe wants to lead in the green energy transition, it needs leaders who understand the speed of technological change. That means more engagement with scientists, engineers, and grid operators—not just consultants and legacy industry executives. It means designing policy based on what is actually happening in high-renewable grids today, not on outdated energy models.

The gap between technological reality and political understanding is slowing down Europe’s transition. Closing that gap must be a priority.

Europe Needs More Peter Carlssons—And a System That Moves as Fast as They Do

The real tragedy of Northvolt is not just its failure but what it represents: the gap between European ambition and execution. The continent has the talent, the capital, and the technological expertise to lead in the green industrial revolution. But it needs to build a system that allows entrepreneurs to scale fast, integrate deeply, and operate without being buried under layers of regulatory complexity.

Peter Carlsson was the right kind of entrepreneur at the right moment. But Europe wasn’t ready for him. The question now is whether it will be ready for the next one.

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