Ex Tesla exec looks to grease wheels of VW-backed battery startup Northvolt

By Eric Johansson

Scandi startup Northvolt is about to raise another multi-million round to supercharge development of batteries for Volkswagen and BMW’s electronic vehicles, sources claim.

In September 2020, the company raised $600m in an investment round that put its valuation at $3.9bn, but now the battery maker is rumoured to be gearing up to raise an even bigger round, according to sources speaking with Dagens Industri.

“This is an offensive new round; the company has wind in its sails,” a source told the newspaper. It is unclear though exactly how big the round will be and when it will be announced.

Former Tesla executive Peter Carlsson co-founded the clean energy startup in 2016 with the goal to manufacture lithium-ion batteries at its plant in Skellefteå in northern Sweden. Since then, the company has tapped into funding from investors like Baillie Gifford, Baron Capital Group, Bridford Investments Limited, Norrsken VC and PCS Holding. Other backers include Spotify co-founder and CEO Daniel Ek, Goldman Sachs, IMAS Foundation and Scania.

Notably, Volkswagen has previously invested in and owns about a fifth of the venture. In March, the automaker made a $14bn order for batteries yet to be produced at the Lapland-based plant. With that deal, Northvolt was named VW’s strategic lead supplier for battery cells.

BMW has also signed a $2.3bn pre-order for batteries from the Scandi startup. Mining industry behemoth Epiroc has made a similar pre-order. In February, Northvolt inked a partnership with micro-mobility startup Tier to produce battery cells for its e-scooters.

The upcoming Swedish gigafactory is scheduled to start production in 2021. It will cut emissions by running on hydroelectricity and source many of its raw materials from nearby mines, rather than them being sourced from the other side of the world.

“We are in the middle of a race to establish manufacturing capacity in Europe, and I believe the companies that are best at attracting talent and capital, while scaling their blueprints the fastest, will be the most successful,” Carlsson said at the time of the September raise.

The news about the rumoured raise comes as the car industry is transitioning from combustion engines to electronic vehicles. Shoring up a steady supply of next-gen batteries is crucial for automakers to win the race for the biggest market share.

A recent GlobalData thematic research report estimated that worldwide fitment of advanced batteries would jump from 9.7 million units in 2020 to nearly 68 million by 2035.

Lithium-ion batteries have become the standard for portable energy standard in everything from smartphones to electronic vehicles. They are able to store more energy and can be more easily recharged than more traditional acid or nickel metal hydride batteries.

However, car manufacturers opting to use lithium-ion batteries must also balance the benefits with potential downsides. Firstly, they are heavy. This is an issue as the chunkier the batteries, the more they sap the performance of the vehicles, thus reducing their size is key to boost efficiencies for cars.

Secondly, the liquid electrolytes in the batteries are volatile and could catch fire when exposed to outside air, for instance during a crash or a failure of the cells’ structure. While GlobalData’s analysts note that there is little evidence to suggest that electronic vehicles are more prone to catch fire than combustion engine cars, manufacturers still have to convince the public that they are safe.

Finally, batteries have a limited lifecycle. Repeated charging and discharging of the batteries can reduce the storage capacity. However, it is unclear how much this will impact cars over a decade or two as most electronic vehicles on our streets haven’t been around for long enough to assess storage impact.

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