- The Swedish startup Northvolt announced Monday it had raised an additional $2.75 billion.
- The electric-vehicle-battery maker counts Volkswagen, Goldman, and Spotify’s CEO among its backers.
- CEO Peter Carlsson said the company will eventually need to draw on funds from public markets.
- See more stories on Insider’s business page.
A Swedish startup that is building one of Europe’s biggest EV battery factories will need to go public in the future despite having already raised $6.5 billion, its chief executive has said.
Northvolt, which was founded by the former Tesla exec Peter Carlsson, has $27 billion worth of contracts to build batteries for the likes of BMW, Volkswagen, and Scania.
On Monday, the company said it had agreed to a deal to establish a joint venture with Volvo to become the manufacturer’s exclusive battery provider. Volvo expects to begin sourcing cells from Northvolt’s expanded Swedish plant in 2024.
Battery makers are racing to keep up with demand as traditional automakers speed up the switch to electric vehicles, fueled by mandatory emissions targets.
The factories are crucial for the creation of the lithium-ion cell, which is one of the central components used in electric vehicles. Elon Musk’s Tesla coined the phrase gigafactory, which is essentially used to describe a massive battery production plant. The term is often used interchangably with megafactory.
China has invested heavily in developing a local supply chain for EVs, accounting for about 75% of all production, according to figures from Benchmark Mineral Intelligence.
Both Europe and the US are some ways behind, but both regions are beginning to take local battery production seriously.
Northvolt, which also counts the Spotify founder Daniel Ek among its backers, is central to Europe’s ambitions and raised $2.75 billion earlier in the month.
Carlsson said the new money has given the startup considerable runway but that the business will eventually need to go public.
“We will need to continuously fund ourselves, and at some point in time when you have this demand, it’s probably the right thing to be on a public market,” he told Insider.
Carlsson, who previously headed up supply chains at Tesla until 2015, said that on the other hand, not being public during the “build-up phase” of the business was useful. He said it allowed the business to be “a little more strategic.”
“But somehow we are going to need access to that additional flow of capital that comes with being public,” he said.
“But the funding right now has given us quite some leeway on the capital we need, so there is definitely no stress.”
Northvolt’s most recent funding round was led by four Swedish pension funds and OMERS Capital Markets, one of Canada’s largest pension groups. Its existing backers Goldman Sachs and Volkswagen also participated.
Carlsson said interest in Northvolt’s raise was intense and that financial markets were valuing EV-related battery firms significantly higher than traditional car manufacturers.
Northvolt’s ambition is to occupy about 25% of Europe’s EV battery market. Carlsson said the coronavirus pandemic had driven demand for electrification and that the business could need to up its investments in order to meet its market share target.
While the firm’s focus has constantly been on the European market, he said that the US had become much more attractive for gigafactories since the election of President Joe Biden.
The White House issued a rallying call for battery manufacturers to come to the US in May. The US is considerably behind China, where 75% of EV batteries are produced.
Carlsson said that deals agreed with European car brands can come with the request for Northvolt to continue supplying batteries in the US.
“That will drive a potential looking at a US localization,” he said.
“But it’s also the new administration and their whole ambition level makes it much more attractive to look at the US. I wouldn’t be surprised that somewhere down the road we would look at the US.”