Stockholm (AFP) - Swedish electric car battery maker Northvolt has filed for bankruptcy in Sweden, dealing a blow to European efforts to challenge Asia’s dominance in the key sector.

Founded in 2016, Northvolt has struggled under a mountain of debt, slow demand and production delays.

The company had filed for bankruptcy protection in the United States in November to buy time to find new investors, but its efforts ultimately failed, leaving its 5,000 employees with an uncertain future.

Northvolt said in a statement Wednesday that despite pursuing “all available options to negotiate and implement a financial restructuring … the company was unable to secure the necessary financial conditions to continue in its current form”.

“Clearly, this is not an outcome we had hoped for,” Northvolt interim chairman Tom Johnstone told a press conference.

The battery maker said in its US Chapter 11 bankruptcy filings that it owed $5.8 billion.

“With limited time and financial resources available, the company was unable to conclude the necessary agreements to secure its future,” Northvolt said.

- ‘Foundation’ -

Northvolt said “a Swedish court-appointed trustee will now oversee the process, including the sale of the business and its assets and settlement of outstanding obligations.”

It will be up to the trustee to decide what actions to take regarding Northvolt’s subsidiaries in Germany and North America, which are not filing for bankruptcy in their respective jurisdictions.

Johnstone said he hoped the outreach that had already been undertaken with investors would help the trustee “identify and secure such financing in the near-term.”

“Though today marks the end of this chapter, we are hopeful that the foundation we have built, the technology, the expertise, and the commitment to sustainability, will continue to drive change in this industry,” he told reporters.

In January, shareholders agreed at an extraordinary general meeting to allow the financially-strained company to continue operating.

Northvolt’s two biggest shareholders are German carmaker Volkswagen – also in financial difficulty – and US investment bank Goldman Sachs.

“Like many companies in the battery sector, Northvolt has experienced a series of compounding challenges in recent months that eroded its financial position,” the company said.

It cited “rising capital costs, geopolitical instability, subsequent supply chain disruptions, and shifts in market demand”.

Production delays caused the company to lose an order from BMW worth two billion euros ($2.2 billion) last year.

- ‘Dark day’ -

In September, the Swedish company said it was slashing 1,600 jobs – a quarter of its staff – and suspending the expansion of its Skelleftea site in northern Sweden.

It also said it was slashing plans to expand the production capacity of its facility to 30 gigawatt-hours per year.

In July of 2024, it said it hoped to reach an annual production of over one GWh this year – well below the facility’s intended capacity of 16 GWh.

One GWh is enough to equip 20,000 average-sized cars.

Swedish Prime Minister Ulf Kristersson, who has ruled out a government rescue, told news agency TT on Wednesday that “the state will do its part, in the best possible way”.

Europe accounts for just three percent of global battery cell production, but has set its sights on 25 percent of the market by the end of the decade.

The company said it had recently completed its first one million battery cells for an unspecified European customer.

The bankruptcy – which local media called the biggest in modern Swedish history – could have a severe social impact in northern Sweden, where Northvolt had concentrated its operations.

The Skelleftea municipality said it was a “hard day” for the area.

“At the same time, we need to remember that Skelleftea’s development journey started long before Northvolt and that many important investments and business set-ups are taking place here,” Kristina Sundin Jonsson, municipal manager, said in a statement.

Shaneika Jeffrey, a representative of the labour union Unionen, said it was “a very dark day for all of us who have worked hard every day and hoped that the company would get through this tough time.”