Volvo and Northvolt to team up on new battery gigafactory

Volvo Cars and Northvolt will set up a joint venture to build a new battery gigafactory in Europe and develop energy cells for the Swedish premium carmaker and its electric-only sister brand Polestar.

The partnership, announced on Monday, will aim to build a plant with capacity of up to 50 gigawatt hours per year — equivalent to batteries for about 500,000 cars — to start production in 2026 as part of Volvo’s push to sell only fully electric cars by the end of this decade.

Volvo will buy an additional 15GWh of batteries from Swedish start-up Northvolt from 2024 out of its first gigafactory, to be built just south of the Arctic Circle in Sweden.

“It’s important to be in the lead,” Volvo chief executive Hakan Samuelsson told the Financial Times. “If you’re late in this race, it will be tough to get the talent . . . This is not something we do because it looks good or sounds good. This is a new core competence for Volvo.”

Volvo is the most advanced traditional carmaker in phasing out the internal combustion engine. Northvolt, Europe’s great battery hope founded by former Tesla executives, is backed by investors including Volkswagen and Goldman Sachs and valued at about $12bn.

The Swedish companies will set up a research and development centre next year in their home country to start developing batteries purely for Volvo.

Samuelsson said he hoped to develop a “state of the art battery” with different chemistry and a better performance to current designs, giving it a longer range and faster charging capability.

The new gigafactory should be enough to cover Volvo’s needs in Europe but it will need similar set-ups in China and the US, its two biggest markets, Samuelsson stressed.

Peter Carlsson, Northvolt chief executive, told the FT his company was now looking at “specifically the US, possibly also Asia” for expansion after previously saying the battery maker had more than enough to do in Europe.

Both CEOs said US President Joe Biden’s push on electric vehicles made it all the more important to establish battery operations in the country, although it is unclear as to whether Volvo and Northvolt would do it together.

Carmakers globally are scrambling to get access to enough batteries for electric cars, with VW alone planning six gigafactories, including buying out Northvolt — in which the German carmaker is the largest industrial shareholder — from a planned plant in Germany.

Various European start-ups are seeking to develop a local battery industry that could eventually rival those in the US and Asia from the likes of Tesla and Panasonic.

Samuelsson said it was essential for carmakers to make batteries “one of the core competences we need to understand much more”. He added: “You can’t just buy on the general market. We want to start from zero. The best way to build up this knowhow is . . . with a very tight co-operation with a partner.”

Northvolt held particular appeal to Volvo because of its use of renewable energy — predominantly hydroelectric power — for the plant it is building in northern Sweden. Their future joint gigafactory would also need access to green energy, possibly from with Finland and Norway.

Carlsson said more joint ventures were likely and that Northvolt would benefit from significant economies of scale as it built more gigafactories, possibly leading it to exceed its 2030 target of 150GWh.