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(Bloomberg) — Northvolt AB’s tribulations are causing headaches far beyond its home base of Sweden, as taxpayer-supported EV battery projects face delays stretching from Germany to Canada.

A €5 billion ($5.5 billion) gigafactory being built by the manufacturer in northern Germany is likely to open six to 12 months later than the targeted goal of 2026, according to people familiar with the matter.

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Cell production at a Northvolt site in Canada, expected to start in the third quarter of 2026, will require more time, people familiar with the project said separately. Timelines for construction and the ramping up of output are likely to be extended, delaying meaningful volumes by more than a year, the people said.

Cathode-making and recycling initiatives that are also part of the C$7 billion ($5.2 billion) first phase in Quebec will be postponed further as the company reviews its ambitions, the people said, asking not to be identified with plans in flux.

Northvolt remains committed to the German and Canadian projects, and is in close dialogue with the key stakeholders, a spokesman said, adding that no decisions have been made. 

The widely felt ripple effects of Northvolt’s sudden cash crunch have exposed governments far from Sweden to criticism that they didn’t properly assess the risk of committing billions to the electric-vehicle supplier’s projects. While top shareholders have pledged support, the company’s mission to take on more-established Chinese and Korean players is far from secure.

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“Almost all European battery startups have overpromised and rode the hype,” said Sam Adham, head of battery materials at consultancy CRU. “It’s possible for Europe to reach those levels, but it all boils down to technical know-how” that the region can’t currently match.

Politicians who threw their support behind Northvolt now find themselves on the defensive. 

The plant in Heide, called Northvolt Drei, was hailed a symbol of Germany’s commitment to the green energy transition and a homegrown battery supply chain for carmakers such as Volkswagen AG, Northvolt’s biggest investor. Its capacity of 60 gigawatt-hours would produce batteries powering up to 1 million EVs per year. 

The federal and regional governments committed €902 million to the project, mostly in grants, and Chancellor Olaf Scholz attended the groundbreaking in March along with Economy Minister Robert Habeck, who hails from the region. 

Just four months ago, Habeck even urged Northvolt to open a second huge factory in Germany to help with its green push. Last week he said his government is in constant contact with the company.

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Any delay at the German plant is likely to prove embarrassing for Scholz’s embattled coalition government. 

Still, Berlin is reluctant to kick in more funds, and is pushing Sweden to do more if required, the people said. 

German support for the project in Heide is “unwavering” and its funding commitment isn’t affected by ramp-up problems at Northvolt’s main Swedish plant, a spokeswoman for the economy ministry said. 

The cost of building Northvolt Drei has increased by €1 billion since it was announced in March 2022, and the timeline has slipped into 2026 from an original plan for late 2025.  

Sweden said last month it won’t grant any emergency loans to help Northvolt through its cash crunch, and has ruled out taking a stake. 

BMW AG also won’t help fund Northvolt after canceling a €2 billion battery order earlier this year, Bloomberg reported this week. VW has said it will support Northvolt’s industrial ramp-up but hasn’t given specifics. 

Canada’s Pledge

Canadian officials have pledged the equivalent of as much as C$7.3 billion ($5.4 billion) in loans, equity stakes and subsidies for Northvolt.

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A big part of that comes from the federal government, though the first disbursements will only start once those expenses have been incurred and audited, the people said. The province of Quebec has already lent out more than a third of its C$1.37 billion in capital commitments to the Northvolt Six project being built near Montreal.

Now Northvolt is at the center of political debate in the French-speaking region. Many worry that taxpayers’ money will now be lost. The liquidity crisis follows a year of disputes over whether or not Northvolt should have received a bypass of an environmental assessment process to facilitate rapid construction.

“I understand that people are worried,” Canada’s industry minister, Francois-Philippe Champagne, said last week, seeking to reassure the public. “For Northvolt, profitability comes through the North American market, and the Quebec plant is fundamental for their future.”

A substantial part of the C$7.3 billion available to Northvolt is in the form of manufacturing subsidies that are dependent on battery production. Those start to phase out in 2030 and expire completely at the end of 2032. This means there’s a financial incentive for Northvolt to gear up production in Canada as quickly as possible, or it will lose the benefits of the deal it made.

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Scaling Back

Northvolt has been racing to shore up its finances, which are partly weighed by an inability to access at least $1.5 billion in loan commitments. Factory performance milestones tied to some government funding are another potential roadblock to accessing cash.

The company said last week that it was making “significant progress” toward raising new financing, while its CEO and founder have pledged to invest more. A group of key lenders has been meeting in parallel to consider the way forward. 

In the meantime, Northvolt has retrenched. On Sept. 23 the company announced widespread layoffs and said it would scale back many of its projects to focus on gearing up battery output at its main factory in Sweden, near the Arctic Circle.  

The company has also said it remains committed to a battery manufacturing joint venture with Volvo Car AB in Gothenburg which broke ground in March. 

“Starting up a megafactory it will be a lot of trial and error,” said consultant Adham. “It’s a high cap-ex, low-margin business.”

—With assistance from Jonas Ekblom and Rafaela Lindeberg.

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