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Europe’s battery makers seek a different growth path after Northvolt’s collapse

Companies scaling down ambitions even as Europe is locked in race to reduce dependence on China

European battery companies are scaling back their ambitions and striking deals with Asian competitors after Northvolt’s collapse cast doubt on the region’s attempts to build an independent industry.

The Swedish group was one of Europe’s best funded start-ups over the past decade and raised $15bn from governments and investors before going bankrupt in March.

Northvolt is now a cautionary tale for other start-ups who are key to achieving the EU’s strategic goal of breaking its reliance on China for batteries as customers shift to electric vehicles, but remain years behind Chinese and Korean competitors.

Groups such as the French Automotive Cells Company and Verkor, and Germany’s PowerCo, are trying to scale up the production of high-power batteries and challenge Asian counterparts such as CATL and BYD.

But they face an even more challenging economic environment, while also needing to reassuring potential financial backers that they will not overextend themselves.

“Investors are asking companies to prove they are not the next Northvolt,” an industry adviser told the Financial Times at Batteries Event, a recent industry conference in Dunkirk.

Europe wants to make 90 per cent of batteries within the continent by 2030. But production capacity will still lag behind China. McKinsey Battery Insights analysts expect Europe’s announced battery production capacity to reach 720 gigawatt hours in 2030, up from 150GWh last year, compared with the 4,370GWh estimate for mainland China.

While some Asian companies have operations in Europe, executives and politicians say European companies must also contribute to the effort.

“We need this industry in Europe, not to provide 100 per cent, but to provide a significant portion,” said Yann Vincent, chief executive of ACC. “It’s a critical element of European sovereignty.”

Meanwhile, European carmakers, including Stellantis and Renault, are already equipping vehicles with batteries made by Asian companies and Chinese companies are extending their dominance of the technology.

CATL and BYD recently unveiled batteries that can be fully charged within five minutes, tackling a barrier to growth of EVs and putting pressure on European challengers to show they can efficiently scale up production.

ACC, a joint venture between Stellantis, Mercedes-Benz and TotalEnergies, is building towards 16GW capacity for the first industrial bloc at its site in Douvrin, northern France, by 2026. It faces similar challenges to those that confronted Northvolt — how to keep production yield high and limit the costly generation of scrap products in the production of battery cells.

“We’re in a period until mid 2026 where we’ll receive all the blows but not yet reach full turnover,” Vincent said, adding that the company needed to cross this “valley of death”.

To preserve capital amid a slowing EV market, ACC abandoned plans to open new factories in Germany and Italy. It is also in discussion with an unnamed “Chinese partner” to learn from its production processes and accelerate efforts to catch up, Vincent said.

Northvolt stretched itself thin by trying to create a value chain of battery-related services, including recycling and cathode manufacturing — a mistake the remaining groups want to avoid.

“Northvolt had the great luxury of being able to raise lots of money quickly. That may also have caused their fall,” said a banker working in the sector.

PowerCo, the Volkswagen-owned producer of battery cells for EVs, has also scaled back original plans. It expects to start producing batteries at its converted plant in Salzgitter this year, but will build one, rather than two production lines as originally envisioned.

Renault-backed Verkor, which has raised more than €2bn to build a gigafactory in Dunkirk, would adopt a “humble” approach by taking on fewer projects and focusing on a single client, said chief executive Benoit Lemaignan.

“We need to be modest in setting up the first part of the project, even if it sounds good on paper to have multiple different workstreams,” he said. Verkor will provide batteries for some of Renault’s sports cars and vans.

Kevin Brundish, head of LionVolt, is among executives who have cautioned against the capital-intensive route taken by Northvolt, and instead favour smaller-scale projects. The Dutch start-up uses technology pioneered in the semiconductor industry to make cells that produce up to twice the range of current battery models and charge twice as quickly.

Companies should not be “trying to compete with entities that have a 10- year head start”, said Brundish. LionVolt has raised €30mn for the commercial manufacturing of its patented anodes in Eindhoven and for a factory in Scotland.

Nard Sintenie, co-founder of Innovation Industries, a Dutch venture capital firm that has invested in LionVolt, said while Northvolt was “me, too” technology, his fund preferred technology that was “disruptive”.

But experts warned that Europe’s goal to become self-sufficient in battery manufacturing would not be achieved without greater public funding similar to that enjoyed by Chinese companies.

ACC, Verkor and Taiwanese solid-state battery developer ProLogium have received more than €3bn in French public funds in recent years to set up operations in the “battery valley” of Dunkirk, which also benefits from access to nuclear energy.

But Dunkirk mayor Patrice Vergriete warned that it would be hard to maintain such support do to France’s high budget deficit.

“France has accompanied these industries but we have less means today and we’re turning towards the European Commission, saying . . . isn’t this re-industrialisation project a European project?”

A commission spokesperson said “the competitiveness of our industry is the number-one priority”, and pointed out that its clean industrial deal had “unlocked” €100bn to promote clean manufacturing.

ACC’s Vincent and Verkor’s Lemaignan called for funding to coalesce around businesses that could realistically produce batteries at scale, while one banker said they expected “consolidation” in the sector.

“Even with strong shareholders, they are under a very strong pressure,” Vincent said. “We’re turning towards the European Commission saying that we need help to cross this valley of death.”

Anything that relies solely on capital wizardry to make sense is probably not worth doing in the first place

M&A bankers can’t catch a break at the moment. Higher interest rates and market volatility were already making it harder to get large deals done, and now some are concerned that the European Central Bank has thrown a spanner into one of the few remaining opportunities to generate fees.

The so-called Danish Compromise is a once-niche bit of EU regulation designed to reduce the capital burden on banks that own insurance businesses. But it came with a loophole — christened the “Danish Compromise squared” — that encouraged banks to acquire other types of business, such as fund managers, through insurance subsidiaries.

BNP Paribas was the most high-profile bank to take advantage, announcing a €5.1bn deal for Axa Investment Management last August, while Italy’s Banco BPM launched a full takeover of Anima, a local asset manager in which it already held a minority stake. 

Normally, buying a fund manager involves a hefty hit to capital ratios. Whatever premium the buyer pays over the fair value of the target’s net assets must be deducted from its regulatory capital, in effect reducing its capacity to lend and invest. If the fund manager sits inside an insurer, however, it is treated as a risk-weighted asset that consumes only a fraction of the capital.

The ECB doesn’t think this behaviour is within the spirit of the rules. The central bank may not have the last word — the European Banking Authority does — but it is nonetheless hard to ignore. Shares in BNP Paribas briefly tumbled when news broke that it may not receive the expected capital benefits, though they quickly rebounded.

Investors should hold their nerve. The shift in approach certainly raises the bar for potential combinations but good deals can still work, and anything that relied solely on capital wizardry to make sense was probably not worth doing in the first place.

BNP now estimates that the Axa acquisition will generate a return on invested capital of above 14 per cent in the third year, rising above 20 per cent by year four. Clearly, that is less positive than before, when it thought returns would hit 18 per cent by year three. But the more important question is, is it still better than the alternatives? 

The bank could invest more in organic growth, but it is already doing that and has previously warned that after a certain point, diminishing returns are a concern.

The other obvious option would be to give the excess cash to investors through a share buyback. Taking its average share price and price-to-earnings ratio over the past 12 months, a €5.1bn share buyback would give a theoretical return on investment of about 14 per cent. Against that, an acquisition still seems like decent business over the long-term.

The only group that really suffers from higher standards is those poor M&A bankers, who might have to work a bit harder to make sure the sums add up in their pitch decks for further deals. But it’s not like they’ve got much else to do at the moment.

• INMD -3.2%, DPZ -2.5%

• RPAY -20.4% (CFO Tim Murphy will be stepping down)
• TLSI -9.1% (files for 91,263 share common stock offering by selling shareholders, relates to warrants)
• MXCT -6.2% (provides update on proposed cancellation of admission of common stock to trading on AIM)
• AAPG -4.1% (presents results from five preclinical studies at 2025 American Association of Cancer Research Annual Meeting, highlighting strong synergistic effects of Olverembatinib combined with Lisaftoclax)
• YMAB -2.4% (Presents Translational Pharmacokinetics of CD38-SADA from Pretargeted RIT Platform at 2025 American Association for Cancer Research (AACR) Annual Meeting)
• ARVN -1.7% (shares new preclinical combination data for the PROTAC BCL6 Degrader, ARV-393, at the 2025 American Association for Cancer Research Annual Meeting)

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Kyiv says it secured concession from Trump administration not to use proceeds for past military aid

The US and Ukraine are close to signing a minerals framework deal as soon as this week, after Kyiv said it secured a significant concession from the Trump administration not to factor in past military aid.

The latest development signals a significant step forward after a signing ceremony on an earlier version of the deal was cancelled in February following the public disagreement in the Oval Office between presidents Donald Trump and Volodymyr Zelenskyy.

After that dust-up, Trump insisted that billions of dollars of past US military assistance should be viewed as loans to be repaid through the agreement. Zelenskyy rejected that proposal.

“It was agreed that assistance provided prior to the signing of the agreement will not be counted towards it,” Ukrainian Prime Minister Denys Shmyhal wrote on his Telegram channel on Sunday night. A senior Ukrainian official said that could pave the way for the framework deal to be signed this week.

The breakthrough comes after Trump met Zelenskyy in the Vatican over the weekend, in what the US president described as a “beautiful meeting” and praised the Ukrainian leader for “doing a good job”. “I see him as calmer,” Trump added. “I think he understands the picture, and I think he wants to make a deal.”

Trump has also expressed deep frustration in recent days towards both Ukraine and Russia over what he perceives as the warring sides not wanting to make concessions to stop Europe’s largest war in 80 years.

“I was very disappointed that missiles were [launched] by Russia . . . I want [Putin] to stop shooting, sit down and sign a deal,” Trump told reporters on Sunday in a rare criticism of Russian President Vladimir Putin. Critics have attacked Trump for being more critical of and piling more pressure on Kyiv than on Moscow.

Trump has viewed the so-called minerals deal to jointly exploit Ukraine’s rare earths and other natural resources as a way to recoup the billions of dollars’ worth of military aid sent to Kyiv under the administration of Joe Biden — and to pressure Zelenskyy towards broader peace negotiations.

The US pressure campaign has been evident since a few days before the Oval Office bust-up, when secretary of the Treasury Scott Bessent​ visited Kyiv and demanded that Zelenskyy sign the initial framework deal in his presence. The meeting devolved into a shouting match.

On Sunday, Shmyhal said he had held ​an “important meeting” with Bessent​ to hammer out final details.

“Legal teams are working on the document. We have made good progress​,” he said, adding that Ukraine had clearly defined ​i​ts “red lines”.

Senior Ukrainian officials ​had previously t​old the Financial Times that the US request to use proceeds from the minerals deal to repay past military assistance could have undermine​d their nation’s sovereignty, potentially scuppering Ukraine’s bid to join the EU and would not have been approved by the country’s parliament.

Many Ukrainian MPs, including some from Zelenskyy’s ruling party, have expressed concerns about the minerals deal and told the FT that they would not vote for a bad deal.

Senior Ukrainian officials told the FT that the framework deal being finalised applied to all mineral resources, including oil and gas, and major energy assets across the entire Ukrainian territory.

“The agreement must comply with European commitments and must not contradict Ukraine’s constitution and legislation​,” Shmyhal said, suggesting that the new agreement was on track to address Kyiv’s concerns.

Kyiv and Washington signed a memorandum of intent ​earlier this month, pledging to advance ​an agreement on ​the investment fund part of the deal on Ukraine’s natural resources and energy assets​. 

The negotiations have been so sensitive that Zelenskyy earlier this month ordered an investigation into the leak of the previous US proposal, which included the use of polygraph tests on government officials.

​In a Fox News interview on Sunday, US national security adviser Mike Waltz said​ he was confident the deal “is going to get done”.

“The negotiators were working hard over the weekend​,” he said, adding that Trump “is determined to make it so​”.