The entrance to Northvolt, the new EV battery plant being built by the Swedish manufacturer in Saint-Basile-le-Grand, Que. on May 16.Christinne Muschi/The Canadian Press
Sweden’s Northvolt AB is cutting a fifth of its global work force as it reins in expansion plans in the face of a downturn in demand for electrical-vehicle batteries, raising new questions about the pace of construction of a battery factory under way in Quebec.
Northvolt said on Monday it is laying off 1,600 employees at plants located in its home country to focus on boosting production at its main factory and serving its current roster of automotive customers. Earlier this month, the company announced it was putting off expansion in other parts of Europe as part of a strategic review.
Northvolt said its latest announcement has no impact on plans to build the $7-billion battery factory near Montreal. However, the company noted it is proceeding with the review before making any decisions on the timing of construction. That is expected to be completed by the end of this autumn.
The company announced the project in Saint-Basile-le-Grand, Que., last year, one of half a dozen battery plants worth tens of billions of dollars slated for Quebec and Ontario by major global auto and battery players. Governments aim to turn Canada into a top supplier to the industry.
Northvolt was wooed with billions of dollars in loans and production incentives from the Quebec and federal governments.
In a statement to The Globe and Mail, the office of Christine Fréchette, Quebec’s Minister for Economy, Innovation and Energy, called the situation a “controlled risk. The government said it is in constant contact with the company, and has been assured the project is not affected by the latest round of cuts.
Early this month, the former Quebec minister for economy, innovation and energy, Pierre Fitzgibbon, said that completion could be delayed by 12 to 18 months, though the company has not confirmed that timing.
On Monday, the opposition Parti Québécois called for an emergency debate in response to Northvolt’s cuts, saying $700-million in provincial taxpayer money could be jeopardized in a project it says lacks transparency. Given the majority that Premier François Legault’s Coalition Avenir Québec government enjoys in the National Assembly, such a debate is unlikely.
Northvolt is ratcheting back its expansion strategy as automakers such as General Motors Co., Ford Motor Co., Volvo Car AB and Volkswagen AG temper their EV outlooks and spending to deal with high capital costs and some resistance among car buyers, who face sticker shock and still-spotty charging infrastructure. In June, BMW cancelled a US$2.15-billion order for Northvolt battery cells.
“While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate,” Northvolt chief executive officer Peter Carlsson said in a statement. “We now need to focus all energy and investments into our core business.”
The company is suspending an expansion at its Northvolt Ett plant in Skellefteå, Sweden. The project was to provide 30 gigawatt hours of additional cell manufacturing capacity. It had already put a cathode active material facility at the site on hold.
The battery maker is also slowing programs at its Northvolt Labs facility in Västerås, Sweden, while reducing corporate support staff numbers in Stockholm, it said.
Mr. Carlsson called the company’s moves “challenging and painful.”
“The decisions are, however, necessary to adjust for current realities and enable the long-term success of Northvolt,” he said.
Northvolt is owned by several partners, including Volkswagen, BMW, Scania AB and Goldman Sachs Asset Management, as well as large Canadian pension plans. Among those, Canada Pension Plan Investment Board, the Ontario Municipal Employees Retirement System and Investment Management Corp. of Ontario have invested in a US$2.3-billion convertible debt program. Caisse de dépôt et placement du Québec provided a $200-million debt financing last year.
The Caisse said it is monitoring the situation closely and is in regular contact with Northvolt. The public-sector fund said the battery sector is experiencing a rebalancing of supply and demand after a period of rapid growth.
“It has also been directly impacted by slowing growth in new vehicle sales, reflecting underlying economic conditions (strong inflation, high interest rates),” Caisse spokesman Jean-Benoît Houde said in a statement. “We still believe this sector has long-term potential.”
With a file from James Bradshaw and Nicolas van Praet