Summary
I have been watching Northvolt’s slow but near-certain slide into bankruptcy. As a passionate advocate for maximizing value and using capital efficiently, I want to critically explore how $13B could be best used and how hype cycles like “sustainability” and “green” can distract from profitable business models. Let’s look at the reasons for Northvolt’s failure and what could have changed their trajectory.
Northvolt: Another Case Study In Hyper-Failing.
I have been watching Northvolt’s slow but near-certain slide into bankruptcy. As a passionate advocate for maximizing value and using capital efficiently, I want to critically explore how $13B could be best used and how hype cycles like “sustainability” and “green” can distract from profitable business models. Let’s look at the reasons for Northvolt’s failure and what could have changed their trajectory.
Drama cannot be the prerequisite for deeper inspection.
Northvolt is an eight-year-old European battery manufacturer. Since 2016, it raised $13 billion in debt and equity. Its biggest stakeholders are Volkswagen and Goldman Sachs, and it has received significant support and investments from the European Investment Bank, the European Union’s lending arm. It has $30 billion in outstanding orders from European car manufacturers that it could fulfill.
Given the massive government support, it has no real competition inside Europe, and almost every European car manufacturer is willing to buy what it produces. Yet, Northvolt burned through the cash it raised and filed for bankruptcy without delivering significant benefits to its stakeholders.
Most of the reaction I see is sadness that Europe couldn’t establish its own battery manufacturer, similar to how the European governments’ actions led to Airbus. However, I do not see much introspection on how $13 billion could have been better allocated. To put this into perspective, countries like Armenia, Mongolia, Madagascar, Niger, and Kyrgyzstan each have a GDP of approximately $13 billion. Where is the accountability?
So, maybe my first takeaway is that we would be better off learning from all situations – not just the ones that make weeks of global headlines because of ethics failures. Even straightforward failures like this one offer valuable lessons.
