Battery manufacturer Northvolt announced today plans to scale back its workforce and exit a battery materials production site, following challenges the company is facing in ramping up its ambitious gigafactory buildout plans, and citing a “challenging macroeconomic environment.”

The announcements form the initial outcomes from Northvolt’s strategic review, launched by the company in July. Founded in 2016, Stockholm, Sweden-based Northvolt was established with a goal to develop the “world’s greenest battery,” targeting a minimal carbon footprint, sustainable sourcing of raw materials and recycling. The company has raised more than $14 billion in capital, including a $5 billion green loan earlier this year, aimed at expanding its Northern Sweden-based lithium-ion battery gigafactory and battery recycling facility.

The pullback comes as European carmakers appear to be readjusting their own electrification plans. Lat week, for example, Volvo Car announced that it is pulling back on its goal to offer only fully electric vehicles by 2030, replacing it with a new 2030 target to have 90% to 100% of its global sales volume consist of “electrified cars,” including fully electric and plug-in hybrids. Volvo cited a series of factors impacting its projected electrification progress, including “a slower than expected rollout of charging infrastructure, withdrawal of government incentives in some markets and additional uncertainties created by recent tariffs on EVs in various markets.”

Volvo and Northvolt had announced a joint venture in 2021 to establish a new gigafactory in Europe with a potential capacity of up to 50 gigawatt hours (GWh) per year, with production scheduled to start in 2026.

In addition to the macro environment, Northvolt had been facing its own challenges, including in ramping up its production. Recently, BMW revealed that it had cancelled a €2 billion contract with Northvolt, with reports that the battery manufacturer would not be able to deliver on time, with BMW turning instead to Samsung SDI for EV batteries. Earlier this year, Northvolt chairman Jim Hagemann Snabe stepped down from his role due to health issues, and has subsequently resigned from the board.

Key actions detailed by Northvolt include placing its cathode active material production facility at Northvolt Ett, the company’s first gigafactory in Skellefteå, Sweden, into care and maintenance in order to streamline operating costs and optimize the sequencing of Northvolt Ett’s ramp-up, and to exit its planned facility for cathode active material production in Borlänge, Sweden. Northvolt said that the company has signed an agreement to sell the Borlänge site. Additionally, Northvolt will integrate its subsidiary Cuberg and lithium metal technology in California into Northvolt Labs, Sweden, and will enter into discussions with potential future partners and investors regarding its battery module and packs assembly facility in Poland.

While the company said that it hasn’t reached any final decisions on the extent of the workforce reduction, it said that its announced moves “will regrettably include some difficult decisions on the size of our workforce to match the needs of a reduced scale of operations.”

Peter Carlsson, CEO and Co-Founder of Northvolt, said:

“With the strategic review now underway, we are having to take some tough actions for the purpose of securing the foundations of Northvolt’s operations to improve our financial stability and strengthen our operational performance. While conditions at this time are challenging, there remains no question that the global transition towards electrification — and the long-term outlook for cell manufacturers, including Northvolt — is strong.”