Canada’s federal government has started an urgent search to find a buyer for Northvolt’s giant battery factory in Quebec, after its Swedish parent company on Wednesday filed for bankruptcy.
Ottawa is working hard to find a new owner for the Northvolt Six gigafactory, said François-Philippe Champagne, minister of innovation, science and technology.
He added that the $7-billion (US$5.1-billion) facility, under construction in Montérégie, south of Montreal, was a cornerstone of the country’s $100-billion EV industrial strategy and would be key to transatlantic partnerships that would help the Canadian automotive sector diversify its international export base.
“The Northvolt factory in Quebec is very important. The profitability of Northvolt hinges on it because North America will be the biggest market [for EVs]. So, we're having discussions to see if we can find a party that is interested in taking it over to preserve the factory within Quebec,” said Champagne.
There are immediate financial and longer-term global trade considerations to be weighed in solving Northvolt’s dilemma at a time when Canada is transitioning toward a low-carbon economy and new international export markets, he said. “We need a European ally which is a leader when it comes to EV batteries."
Chinese buyers would “clearly not” be under consideration, Champagne stressed, speaking at a press briefing on Canada’s response to the U.S. government's imposition of 25 per cent tariffs on Canadian steel and aluminum.
Northvolt Six was on track to become one of North America’s largest battery plants. At full production, it is designed to roll out 60 gigawatt-hours of lithium-ion batteries a year, enough for one million EVs.
When unveiled in 2023, the federal and provincial governments pledged $1 billion to back construction of the plant. Canada’s National Observer understands that the federal government has yet to release its financial commitment to Northvolt, while Quebec has lost $270 million invested so far, but could reclaim the land on which the gigafactory was being built.
Site preparation for Northvolt Six has now been halted. Foundation pouring had been slated for the spring, along with engineering work on the plant’s battery cell production line, cathode active materials plant, and recycling facility.
Stockholm-headquartered Northvolt in November filed a Chapter 11 bankruptcy motion for its North American division, which is developing the Quebec gigafactory, to stave off creditors while it reorganized operations. This followed its failed bid to secure rescue funding of US$900m that left it with debts of almost US$6 billion and only $30m in available cash, enough to cover a week’s operations.
“[The bankruptcy filing] follows an exhaustive effort to explore all available means to secure a viable financial and operational future for the company, which ultimately did not lead to a satisfactory outcome,” Northvolt told Canada’s National Observer, in an emailed response.
“As a wholly owned subsidiary of Northvolt AB, any decisions regarding Northvolt North America will be made by the court-appointed trustee, together with the group’s lenders, at the appropriate time.”
Quebec’s low-price hydropower and wealth of critical minerals — used to make lithium-ion batteries — were central to saving the Northvolt Six factory and Northvolt North America from creditors last year.
A Northvolt spokesperson confirmed Canadian operations “remain solvent,” adding that the company “intends to honour its obligations and pay its liabilities in the ordinary course, including any obligations towards its employees.” Northvolt North American currently has $200 million in active contracts with suppliers and around $330 million in operational capital.
Northvolt's troubles stem from a previously overhyped global EV market that has been softening in recent months, reducing demand for batteries and negatively impacting investor interest, as well as rising competition from Chinese and South Korean manufacturers flooding the market with low-priced technology.
The Canadian fiasco reflects broad challenges in the global battery sector, where numerous manufacturing plant projects have struggled due to fragmented supply chains and market uncertainties. More than 600 gigawatt-hours of factory capacity in Europe has recently been cancelled, delayed, or downsized.
China in 2024 accounted for over three-quarters of three terrawatt-hours a year of battery manufacturing capacity now operating worldwide, according to latest figures from the International Energy Agency, a global industry watchdog.
Darius Snieckus / Local Journalism Initiative / Canada's National Observer
Comments
European buyers? We already have VW. Why aren't we looking at South Korea or Japan?
Exactly. But it will be difficult to compete with Chinese batteries from CATL and BYD, the biggest companies with most advanced products who have been plugging away, so to speak, at the technology years ahead of everyone else.
Still, China needs raw materials and will no doubt approach Canada to patch up their differences and try to set up shop if Canada refuses to ship raw minerals with little, if any, added value.
All I can say is given China's penchant for commercial bullying and corporate espionage, Canada needs to establish some very strict rules and proceed with caution with contracts. Look to Norway for inspiration in how to sell resources, i.e. always set your own conditions, keep an equity stake and never, under any circumstances, allow foreign commercial interests to have any control over government policy.
Never give anyone else excessive advantages when they approach you with seemingly generous terms to set up shop on your home turf.
The interesting thing at this particular moment is how Canada finally grew a spine and is standing up to the biggest bully on the block. Make no doubt, the world is watching and the initial responses have been new found attention and respect. This gives Canada a psychological advantage when it approaches its allies in Europe and Asia for building trade relationships, which adds to its existing advantages of having attractive critical minerals and an advanced knowledge base to expand as it withdraws from the American orbit.
If Canada can exploit its newly discovered courage and work out a deal with China with eyes wide open and armed with tough contracts, then affordable Chinese EVs and batteries could help Canada move forward steadily toward net zero and a full embrace of clean energy.
Its important to keep democratic allies active in our economy to prevent any Chinese attempt to dominate a Western nation's grid or financial system or military tech. But at the same time it's perfectly clear now that China has pulled a Gretsky and moved toward where the world econony is going -- electrification and net zero. Everone else, with the exception of the EU, which was forced by weaponized Russian fossil fuels to change quickly, is walking backwards into maintaining the dominance of last century's carbon energy, although that is being eaten alive by solar and wind at the periphery even if OPEC doesn't care to notice the evidence staring at it in the face.