(This May 5 story has been corrected to say that the planned transaction to raise Volvo Cars stake in Novo Energy to 100% from 50% is still pending approval, in paragraph 9)

STOCKHOLM (Reuters) - Volvo Cars' battery company Novo Energy said on Monday it will cut its workforce by 50% to reduce costs after evaluating its business to take account of the bankruptcy of Sweden's Northvolt, which originally co-owned the venture.

"Despite our best efforts to secure our business and an extensive ongoing search for a suitable new technology partner, the current economic challenges and market conditions have made it impossible to maintain our operations at the current scale," Novo Energy CEO Adrian Clarke said in a statement.

Northvolt and Volvo Cars formed Novo Energy in 2021 to build a dedicated battery factory in Gothenburg on Sweden's west coast.

The joint venture already in January began cost-cutting measures, including dismissing 30% of its staff.

The layoffs announced on Monday would cut 150 further jobs cut, a Novo spokesperson told Reuters.

Novo said that producing batteries with a new technology partner in the Gothenburg area of Sweden remained its primary long-term objective.   

A spokesperson for Volvo Cars told Reuters that it shared the objective for Novo but declined to provide further details.

Novo said it would continue limited operations while finalising the first phase of construction and would explore future scenarios that could allow it to resume activities at scale.

In a transaction still pending final approval, Volvo Cars in February agreed to buy Northvolt's 50% stake in Novo for a token sum and thus take full ownership.

Northvolt, once considered Europe's best hope for a battery champion, filed for bankruptcy in March.

Volvo Cars has also struggled in recent months, and its CFO said in connection with its quarterly earnings presentation in April that the company did not foresee any major investments in the near term.

While construction of the factory is near completion, no battery equipment has been moved in, the carmaker's new CEO Hakan Samuelsson said in April.

Samuelsson then reiterated the need for a technology partner, but also said he thought it would be necessary to share the plant with other Geely brands.