General
March 15, 2021
6 minutes read

Swedish EV Battery Startup Northvolt Gets $14B Order From VW

It’s definitely a good day for Northvolt, a Swedish startup making batteries for electric vehicles and a highly-funded one at…

It’s definitely a good day for Northvolt, a Swedish startup making batteries for electric vehicles and a highly-funded one at that with some $3.3 billion in equity and debt financing.

Northvolt has sealed a big contract with German automaker Volkswagen to supply $14 billion worth of lithium-ion batteries for the automaker’s electrification efforts over the next 10 years, with Northvolt becoming the strategic lead battery supplier to the Volkswagen Group in Europe.

The $14 billion battery deal is a landmark one for Northvolt and brings the total value of supply contracts under its belt to $27 billion, quite unprecedented for a five-year-old startup in its early stages.

As part of its supply deal with Northvolt, Volkswagen which was already an investor in Northvolt before now has increased its stake in the company to 20%. As an anchor investor, it’ll also be Northvolt’s biggest customer marking a significant tie-up between both companies.

Northvolt is currently building a large-scale battery factory in Skellefteå, a historically industrial city of Sweden, where it’s aiming to kickstart the production of lithium-ion batteries for electric cars and supplying to committed customers like Volkswagen and another German automaker, BMW.

Volkswagen’s strategic tie-up with Northvolt is similar to that the German automaker has made with another EV battery company, QuantumScape, which became a publicly-traded company last year. Though unlike Northvolt, QuantumScape is working on developing solid-state batteries on a mass scale for electric cars which’s a feat that hasn’t yet been achieved worldwide.

Unlike QuantumScape, Northvolt is working on developing normal lithium-ion batteries, a feat that’s already relatively common and makes Northvolt a safer bet to get EV batteries for Volkswagen compared to QuantumScape.

Basically, Volkswagen has hedged its bets with Northvolt and QuantumScape, betting on Northvolt for the supply of normal lithium-ion batteries and QauntumScape for solid-state batteries if the technology becomes feasible in the future. Notably, solid-state batteries would allow for much higher driving ranges than usual for electric cars if compatibility for mainstream electric cars and then mass production is achieved.

Volkswagen is one of the biggest-spending automakers worldwide on the transition towards electrification and has committed an $86 billion spending plan for that between 2020-2025. It’s then no surprise that it’s drawn out a $14 billion ten-year battery order for Northvolt that sums up to $1.4 billion for each year.

A $14 billion order from Volkswagen undoubtedly presents a big revenue stream for Northvolt. Altogether, the battery startup now has $27 billion worth of contracts in its pipeline even before starting production, and such makes it one of the major startups to watch in the global EV industry which is poised for big growth in the coming years.