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Northvolt co-founder urges EU not to give up EV battery

dream

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Firm has filed for bankruptcy protection, needs $1.0-$1.2

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EU hopes hit by weak EV sales, production issues, China

strength

By Marie Mannes, Alessandro Parodi and Stine Jacobsen

STOCKHOLM/GDANSK, Nov 22 (Reuters) - Northvolt's

financial collapse deals a blow to Europe's plan to set up its

own battery industry to power electric cars, stirring a debate

about whether it needs to do more to attract investment as

startups struggle to catch up with Chinese rivals.

Europe's biggest hope for an electric vehicle battery

champion filed for U.S. Chapter 11 bankruptcy protection on

Thursday after talks with investors and creditors including

Volkswagen and Goldman Sachs ( GS ) for funding failed.

The Swedish company, whose motto is "make oil history", has

received more than $10 billion in equity, debt and public

financing since its 2016 start-up. Volkswagen and Goldman Sachs ( GS )

each own about one fifth of its shares.

Northvolt said on Friday it needed $1.0-$1.2 billion in new

funds under the restructuring process, which it hopes will end

by the end of March.

In recent months, it has shrunk the business and cut jobs in

a bid to shore up its finances. But it has struggled to produce

sufficient volumes of high-quality batteries, and lost a 2

billion euro ($2.1 billion) contract from BMW in June.

That has left Europe's ambitions to build its own battery

industry looking a distant dream.

In recent years, Northvolt led a wave of European startups

investing tens of billions of dollars to serve the continent's

automakers as they switch from internal combustion engines to

electric vehicles.

But growth in EV demand is moving at a slower pace than many

in the industry projected, and China has taken a huge lead in

powering EVs, controlling 85% of global battery cell production,

International Energy Agency data shows.

Making batteries and cells, the units that store and convert

chemical energy into electricity, is a delicate process and

doing so at scale is a challenge for any battery maker.

Northvolt has missed some in-house targets and curtailed

production at its battery cells plant in northern Sweden,

underscoring the difficulties, Reuters reported on Monday.

"The biggest issue is that batteries are not easy to make

and Northvolt haven't satisfied the supply demands of their

customers - that is a management issue," said Andy Palmer,

founder of consultancy Palmer Automotive said.

"The Chinese are technologically 10 years ahead of the West

in batteries. That's a fact," he said.

At least eight companies have postponed or abandoned EV

battery projects in Europe this year, including China's Svolt

and joint venture ACC, led by Stellantis ( STLA ) and

Mercedes-Benz.

In 2024, Europe's battery pipeline capacity out to 2030 has

fallen by 176 gigawatt-hours, according to data firm Benchmark

Minerals. That's equivalent to almost all the current installed

capacity in Europe, according to Reuters calculations.

RETHINK

Some executives say Europe should do more to attract and

support home-grown projects so they can compete with Chinese

rivals such as CATL and BYD.

"Europe needs to rethink how it supports a nascent sector

before China eats up the entire value chain, which is due to

smart planning," said James Frith, European head of Volta Energy

Technologies, which specialises in battery and energy storage

technology.

Among its $5.8 billion in debts, Northvolt owes the European

Investment Bank (EIB) some $313 million.

EIB vice president Thomas Östros said it had been a

constructive partner to Northvolt, but it needed to safeguard

the EIB and EU's interests.

"It remains the case that Europe has a strategic interest in

a European battery industry for electric cars and we will follow

developments very closely. But it is much to early to say what

the outcome will be," he said.

The Swedish government has repeatedly said it does not plan

to take a stake in Northvolt.

On Friday, Northvolt's outgoing CEO and co-founder Peter

Carlsson said he was a "little worried" Europe is giving up on

its dream of competing with China.

He said Europe would regret it in 20 years time if it

retreated.

"It's not a straight journey and right now, we're all in a

bit of a down in that journey where there's more hesitations,

there's more questions on the speed of the transition from the

carmakers, from policymakers, from the investor community," he

told reporters in a call.