COPENHAGEN (Reuters) -Volvo Cars said on Wednesday it will invoke a right to acquire Northvolt’s shares in their Swedish battery joint venture, NOVO Energy, after Northvolt decided to no longer provide funding for it.
Northvolt this year has gone from being Europe’s best shot at a home-grown electric-vehicle battery champion to racing to stay afloat by slimming down and cutting jobs, hobbled by production problems and a lack of funding.
Volvo (OTC:VLVLY) Cars, which is majority-owned by China’s Geely, and Northvolt formed a joint venture to build a gigafactory to produce sustainable batteries for electric cars in 2021. They later said the plant would be set up in Gothenburg in southwest Sweden.
“Volvo Cars is evaluating any potential impact these developments could have for NOVO Energy and is investigating future scenarios to protect the investment,” the Sweden-based automaker said in a statement.
NOVO, with planned investments of 30 billion Swedish crowns ($2.8 billion), was intended to make battery cells specifically developed for use in all-electric Volvo and Polestar (NASDAQ:PSNY) cars, with production expected to start in 2026, the companies said in 2021.
Luxury EV maker Polestar, also majority owned by China’s Geely, told Reuters in September that it has no orders with Northvolt as it does not produce any models that need the type of batteries Northvolt produces. Its CEO said this month the company had launched a strategic review of its operations after a 14% drop in third-quarter deliveries.
It was not immediately clear what the NOVO facility, which is under construction, will be used for, Volvo said on Wednesday.
“Any battery production at NOVO Energy is dependent on third party or other partner involvement,” Volvo said, adding it did not see its vehicle roll-out plan being affected.
A NOVO spokesperson declined to comment.
Northvolt said in a separate statement it had chosen to halt further capital investment into NOVO Energy, focusing instead on its wholly owned cell operations.
The company has said it is in talks with investors and lenders to secure funding and that it has made significant progress towards a financing deal.
Volvo Cars CEO Jim Rowan said this month the company would not put any money into Northvolt.
($1 = 10.6305 Swedish crowns)