Northvolt expands gigafactory plans to 60GWh

Swedish battery producer Northvolt is expanding its plans for a gigafactory in Sweden because of increased demand for offtake agreements from European carmakers and extra investment from a consortium of Swedish pension funds.

Northvolt plans to increase capacity at its gigafactory in Ett, Sweden, to 60GWh, up from an original plan of 40GWh, citing rising demand for its batteries. This would push up Northvolt's total planned European battery production capacity to 150GWh by 2030. The factory is expected to begin partial operations by the end of this year. Northvolt expects to build at least two additional gigafactories in Europe to meet its capacity goals and is exploring the possibility of building one of them in Germany.

"We have been producing cells at our cell industrialisation facility, Northvolt Labs, for more than a year and are excited to now bring the knowledge and technology we have developed to the north and start large-scale production," chief executive Peter Carlsson said.

The company has agreed $27bn worth of contracts with carmakers including Volkswagen and BMW. Volkswagen Group is also a major shareholder in Northvolt. Other shareholders include investment bank Goldman Sachs and a consortium of Swedish pension funds.

Global electric vehicle (EV) sales rose by 151pc year on year in January-April and are expected to rise by over 50pc this year, according to research by Macquarie, driving demand for batteries and battery metals, especially nickel, lithium and cobalt. Macquarie estimates that this increase in EV sales translated to a 114pc rise in lithium demand from the battery market during the same period, a 105pc rise in nickel demand and an 84pc rise in cobalt demand. European EV sales were up by 129pc in January-April compared with the same period in 2020.

"This is a new European industry in the making and it will require significant investments over the coming decade. It is encouraging to see that the investor community has identified the opportunity early, and we hope to see more investments throughout the value chain over the coming years," Northvolt chief financial officer Alexander Hartman said today.

Europe is expected to add up to 331GWh of battery production capacity by 2025, according to automotive researchers P3, and planned capacity continues to grow as European producers attempt to catch up with the well-established battery industry in Asia. Demand for battery cells in Europe is expected to grow to over 200GWh annually by 2025 and over 400GWh by 2030. Demand will also grow from international buyers such as the US, which is further behind on developing its own battery industry and may look to European and Asian suppliers for its EV industry.

By Thomas Kavanagh