An introduction to the battery company NorthVolt and its strategy

Summary - NortVolt, led by Tesla-Veteran Peter Carlsson, is building the very first European battery gigafactory. One that should counterbalance Elon Musk and, above all, the Asian producers. The European car industry is too dependent on Asian and American manufacturers. That makes the European car industry, with 2.7 million jobs, vulnerable. What is NorthVolt’s strategy to create a European battery power basis? An interview with CEO Peter Carlsson, who urges Europe to quickly build on its own battery knowledge.

This article is derived from the Financieel Dagblad and added upon. For the original, click here.

Construction of Nortvolt R&D in Västerås started in 2018. In total, almost 400 people now work in the test factory, which has an area of 19,000 m2. Photo: Nils Petter Nilsson for the FD. NorthVolt recently raised an additional $600 million in equity – enabling its expansion of production and recycling capacities, as well as R&D activities to support the target of establishing 150 GWh of manufacturing capacity in Europe by 2030.

Peter Carlsson arrives five minutes late for the interview. Black sweatpants and hoodie. White sneakers. A backpack with his laptop in it. That's it. The man who has the ambition to start the very first ‘European mega battery factory’ does not have his own office. He settles down in the open seating area on the first floor of Northvolt's R&D Lab, on the outskirts of the Swedish town of Västerås.

CEO and founder Peter Carlsson (48) returned to Sweden after an intense career at Tesla in Palo Alto. He came back to build his own battery factory.

It is hard to imagine that this place, a test site of 19,000 square meters, consisted mainly of forest two years ago. From open-plan offices to cleanrooms, nearly 400 people are involved in battery technology for electric cars. in this factory The interior of the open office garden is white and sleek. Everyone speaks English. It feels like a little Silicon Valley.

"This one can come off now," says Carlsson, tucking his mouth mask into his pocket. Hardly anyone in Sweden wears a mask, not even in public transport. But they are worn at Northvolt. Carlsson explains: 'Our team does not only consist of Swedes, but also dozens of Koreans, Japanese and Americans. They want to wear one for health and safety reasons. '

Later this week he will fly on to Skellefteå, in the north of Sweden. Northvolt Ett, or Northvolt 1, has been under construction there since October 2019. That battery factory, with a planned capacity of 40 gigawatt hours, will run on clean and cheap hydropower starting next year. Around 750,000 electric cars can then be supplied with European-made batteries every year.

A Time For Growth

The need to reduce carbon emissions has enormous consequences for Europe, explains Carlsson. For example, the Swedish Volvo wants half of all their cars sold to be fully electric by 2025. Volkswagen Group, one of the largest car manufacturers in the world, has decided to stop developing combustion engines from 2026 onwards. The demand for lithium-ion batteries is therefore going to 'explode', says Carlsson. 'Our estimate is that Europe will need 800 gigawatts of battery power within ten years. Those are 25 mega factories like the one we are building now in Skellefteå. '

Tesla Veterans

Carlsson knows what he's talking about. After years at, among others, Ericsson and NXP, he moved to Palo Alto in 2011 to start working at Tesla. His assignment: to build a worldwide logistics chain of hundreds of suppliers for the still young company of Elon Musk. 'A fantastic time', Carlsson recalls. "We grew from 400 to 17,000 employees, built the Model S and Model X and the Gigafactory in Reno, Nevada."

At the end of 2015, Carlsson had enough of the hard work and left. He invested in a number of start-ups and spent time with his family. But soon he realized that standing on the sidelines is not in it for him. In Silicon Valley, Carlsson read about the European Union's great ambitions to build a green economy. This requires a lot of energy storage and batteries. Together with Paolo Cerruti, also a Tesla veteran, he did some back-of-the-hand calculations. Building your own Gigafactory as Elon Musk did, is that feasible in Europe?

Carlsson now knows the answer is ‘Yes, if you think big right away. We too have the entire chain - from processing raw materials such as lithium and cobalt to developing software for battery management - within one company. That gives more control over quality and we can produce more cheaply.’

Billions and Billions

Building such a mega factory can easily cost billions. Tesla allocated $ 5 billion for the Gigafactory 1 in Nevada.

Carlsson was urged by people around him not to embark on such an adventure. After all, Europe is known as a risk-averse continent, with a much smaller venture capital market than the United States. Moreover, the Chinese already make cheap batteries on a much larger scale. The debacle with the solar panel industry is still fresh in Europe’s mind: China provided panel factories with cheap government money and pushed European manufacturers out of the market with low prices. End of European industry.

But raising money turned out to be no problem for Carlsson. Over the past four years, Northvolt has accumulated $ 3 billion in capital. Tthe European Investment Bank alone has lent more than € 400 million to Tesla's Swedish challenger. The loan is fully in-line with the strategy that the EU should become less dependent on technology from China and the US.

German car manufacturers Volkswagen and BMW, which now have to import batteries from Asia, have also stepped in. BMW has already placed an order of €2 billion for batteries that will be delivered in 2024. Volkswagen is investing €900 million in a Northvolt factory that will be located in Salzgitter, Germany. They would benefit significantly from a European factory that is 'just around the corner', says Carlsson. 'A battery is not a standard product. Car manufacturers have an enormous need for joint design, for co-creation. Because if a battery gets smaller in size, it affects the entire design of a car.'

At the end of last month, Daniel Ek, CEO of the Swedish music streaming service Spotify, took a share of $600 million together with a group of investors. Carlsson: ‘All these financial constructions and investors are also pioneering. Hopefully we will pave the way for more companies who want to scale up in this industry.'

What about the European Battery Market?

The lithium-ion battery was developed in the 1980s by Japanese engineers at Sony and Panasonic. In the 1990s, South Korean LG Chem emerged, which purchased knowledge by hiring a battalion of Japanese engineers. In the last decade, knowledge has shifted to China. Carlsson: 'The electrification of buses, scooters and cars is high on the agenda of the Chinese government. They learn very quickly. ' Bloomberg estimates that 80% of global battery production comes from Asia. China's share of total Asian production is nearly 70%.

And Europe? Carlsson is afraid that the knowledge of highly trained engineers in Europe still relies too heavily on the combustion engine, which is about to be phased out rapidly. This makes the European car industry, which employs some 2.7 million people, extremely vulnerable.

Meanwhile, Tesla is building a mega factory near Berlin, in the backyard of the German car giants. The less than ten-year-old Chinese CATL has also moved to Germany to be closer to the European market. The world's largest battery manufacturer - with a turnover of around €5.6 billion - is building a factory in Thuringia to supply BMW and Volvo.

Carlsson points to the elephant in the room. 'Do we sit idly by and let the Americans and the Chinese build their factories here? Or are we going to work hard on our own industry? Europe needs to quickly build its own battery knowledge. That should not only happen at car manufacturers, but also at universities, machine manufacturers and young start-ups. '

The Upcoming Battery-Wars

Expanding on battery knowledge is critical to the European economy. Considering the battery is the most expensive part of the car, whoever wins the battle for the battery wins the battle for the electric car. Moreover, the consumer wants a car that can be charged quickly, has a high range and a battery that lasts a long time. Elon Musk announced last month that he would design the cells in the Tesla battery from scratch, which he says will increase the range by about 50%.

Europe can make a comeback, is the belief of Peter Carlsson, the CEO who copied the art from Tesla. 'At the bottom of the line it's all about talent. You can work wonders when you have the best people. And everyone must feel the urgency that the clock is ticking. Time cannot be made up.'

After less than an hour Carlsson's time is up. The mouth mask is put on again, on to the next appointment. Outside, the spokesman points to Peter Carlsson's white car. A German Audi e-tron, not a Swedish Volvo. Because Volvo has been Chinese since 2010, and has just signed a multi-billion dollar deal with CATL and LG Chem to supply batteries for the next ten years.

The geopolitics in the parking lot agrees with Carlsson: Europe must hurry.

A Chilly Relationship between Sweden and China

No country in the world, with the exception of Japan, is as negative about China as Sweden. While the relationship was always good. Sweden was the first country in Western Europe to establish diplomatic relations with China in the early 1950s. The change came in 2015, when the Chinese-Swedish publisher Gui Minhai, while on holiday to Thailand, suddenly disappeared without a trace and later turned up in Chinese captivity. At the beginning of this year, Gui Minhai was sentenced to ten years in prison, according to the judge because the man provided secret information to foreign countries. "He wrote stories about rich and powerful Chinese and, for example, their extramarital relationships," says Björn Jerdén, head of Asia programs at the Swedish Institute of International Affairs. "And apparently that was not tolerated."

The issue, coupled with the crackdown on the Hong Kong protests, sparked much anger among the Swedes. Ten Swedish cities ended their ties with Chinese twin cities. Västerås, where Northvolt Labs is located, has also stopped its knowledge exchange project with the city of Jinan. The fact that Chinese ambassador Gui Congyou uses threatening language in interviews and opinion pieces at Sweden and Swedish journalists has added fuel to the fire. "Very intimidating, we have never experienced this," says Jerden. 'But of course it is counterproductive, the press is just now going to write even more negatively about China.'

But it does not stop there. Beyond the realm of journalism, there is Swedish identity at stake.

Volvo is no longer Swedish.

In 2010, ten years ago now, the producer came into Chinese hands. Magnus Sundemo spent much of his life working as an engineer at Volvo and at that time was president of the internal union. In the packed restaurant Bellora, in the center of Gothenburg, he reminisces about his first meeting with billionaire Li Shufu, chairman of Zhejiang Geely Holding Group, China's second-largest car maker. "He was really excited about Volvo."

Li took over Volvo from the American Ford, which had neglected the brand. "The Chinese believed in Volvo and let us do our thing," says Sundemo. 'That has done the company's self-esteem a lot.' The number of cars sold has jumped since the acquisition, from some 373,500 in 2010 to 705,000 in 2019. The profit of € 1.3 billion is more than eleven times what it was.

But nowadays there is uncertainty among workers in Gothenburg. The strings are tightened from China. Li announced at the beginning of this year that Volvo wanted to merge with Geely Auto. The brands Polestar, which has just launched a competitor for Tesla's Model 3 and Lynk & Co, are part of the new merging company, which may be listed on the stock exchange. "We want to strengthen the synergy without affecting the individuality of the individual brands," says Li.

The announcement sparked a lot of rumors and commotion, even in the Swedish parliament. Nothing has been formally decided yet; a working group is examining the options. But what if the activities move to China? Sundemo has seen first-hand how the Geely R&D center in China has changed from a hall full of old junk into a state-of-the-art research center in ten years. He is not at ease. "The Chinese have learned a lot from us and don't need us anymore."