Novo Energy Slashes Workforce Amid Fallout from Northvolt Collapse and Mounting Financial Struggles
In a stark signal of the turbulence rocking the European electric vehicle (EV) battery sector, Novo Energy—Volvo Cars’ battery arm—has announced it will lay off half of its workforce, affecting around 150 employees. The move comes as part of a sweeping cost-reduction initiative following the bankruptcy of its former co-founder and partner, Northvolt. The Swedish battery firm, once hailed as Europe’s brightest beacon in EV innovation, declared bankruptcy in March 2025, sending shockwaves through the continent’s clean tech industry and triggering an existential crisis at Novo Energy.
Based in Gothenburg, Novo Energy was originally created as a 50/50 joint venture between Volvo Cars and Northvolt in 2021, with the ambition to build a state-of-the-art battery production facility capable of delivering 50 GWh annually. However, Northvolt’s financial instability and eventual collapse pulled the rug out from under Novo’s feet, leaving it stranded without the crucial technology and production expertise it had relied upon.
A Harsh Winter for Novo Energy: Second Round of Layoffs Hits Hard
The latest round of layoffs, announced in early May 2025, marks the second major workforce reduction within a span of four months. Back in January, Novo Energy had already trimmed 30% of its employees in an effort to stabilize its financial footing. Now, as the company finds itself unable to secure a new technology partner and facing diminishing prospects in a hyper-competitive market, deeper cuts were inevitable.
CEO Adrian Clarke described the decision to let go of 150 employees as “incredibly difficult,” acknowledging the emotional and professional toll it will take on the affected staff and their families. Yet, he emphasized the necessity of the move to ensure the survival of the enterprise amid “unsustainable market conditions and a loss of strategic direction” following Northvolt’s collapse.
With the latest workforce reductions, Novo Energy has scaled its operations down to what it describes as “limited capacity,” focusing resources on completing the initial construction phase of its battery factory. Plans for full-scale production—originally set for 2026—have now been put on indefinite hold as the company navigates uncharted waters.
Northvolt’s Bankruptcy: The Catalyst for Crisis
The crumbling of Northvolt in March 2025 represented more than just the end of a startup—it shattered a cornerstone of Europe’s vision for a self-sufficient green energy supply chain. Northvolt, once a darling of European clean tech circles and a flagship project for battery independence from Asian suppliers, had partnered with Novo Energy to spearhead large-scale battery manufacturing in Sweden.
But mounting debt, liquidity shortfalls, and repeated delays in project rollouts left Northvolt financially paralyzed. When it officially filed for bankruptcy, the implications were immediate for Novo Energy. With the loss of Northvolt’s intellectual property, supply chain networks, and technical support, Novo was left to pick up the pieces of a business model that no longer held together.
Volvo Cars, recognizing the urgency of the situation, acquired Northvolt’s 50% stake in Novo Energy in February 2025 for a symbolic sum. While this move gave Volvo full ownership, it also placed the burden of salvaging Novo Energy entirely on the automaker’s shoulders—without the benefit of Northvolt’s technological prowess.
“Our ability to operate at the intended scale was predicated on Northvolt’s contribution,” Clarke admitted during a press briefing. “Without their technology and infrastructure, we are fundamentally handicapped.”
A Race Against Time: Search for a New Partner
Since Northvolt’s exit, Novo Energy has been desperately seeking a new strategic partner with the expertise and resources to fill the technological void. Despite several months of exploration, talks with potential collaborators have so far yielded no concrete results. Industry insiders suggest that Novo’s precarious position—caught in between ownership by a struggling automaker and the loss of its operational foundation—makes it a risky bet for would-be partners.
Meanwhile, the financial support that once flowed from Northvolt has vanished. The resulting funding gap, compounded by market volatility and rising costs in the battery supply chain, has forced Novo Energy to operate in survival mode. Its only viable path forward now hinges on either securing a strong new partner or completely overhauling its business model—neither of which appears imminent.
Volvo Cars’ Own Troubles Deepen the Crisis
The crisis at Novo Energy cannot be examined in isolation. It reflects broader challenges currently facing Volvo Cars itself. The automaker, which has committed heavily to an electrified future, is grappling with declining revenues, global trade tensions, and inflationary pressures that have rattled the automotive sector as a whole.
In a parallel move to Novo’s layoffs, Volvo Cars recently announced a 5% workforce reduction at its production facility in Ridgeville, South Carolina. These job cuts are part of a sweeping “cost and cash action plan” initiated by CEO Håkan Samuelsson, aimed at tightening expenses amid softening demand and ongoing uncertainty over tariffs and trade policies.
A Volvo spokesperson emphasized that the company’s actions are driven by a need to balance long-term investment in EV technologies with the short-term realities of fiscal discipline. Yet, for many industry observers, these cost-cutting measures point to deeper problems in the EV space, where rapid expansion has often outpaced sustainable business fundamentals.
European Battery Dreams on the Brink
The unraveling of Northvolt and Novo Energy’s current standstill offer a sobering case study in the fragility of Europe’s green energy ambitions. For years, the continent has pushed aggressively to reduce dependence on Asian battery suppliers, investing in local production facilities to secure a resilient and sustainable supply chain. Northvolt was central to this strategy, with projects backed by billions in public and private funding.
Its bankruptcy not only undermines confidence in European battery startups but also raises pressing questions about the feasibility of competing with more mature players in South Korea, Japan, and China. If companies like Novo Energy cannot rebound, Europe may find itself back at square one—reliant on imported cells and modules despite years of local investment.
Novo’s leadership insists that the company’s original mission—to build cutting-edge batteries in Gothenburg—is still alive. However, the optimism rings hollow against a backdrop of layoffs, halted production plans, and continued uncertainty about future partnerships.
Labor Unrest and Union Challenges
The ongoing restructuring at Novo Energy has sparked tensions with labor unions in Sweden, where job security is a highly sensitive issue. Negotiations are currently underway, but the scale of the layoffs—amounting to half the company’s remaining staff—has alarmed labor advocates and sparked calls for greater government oversight.
Union representatives argue that the situation highlights the perils of corporate dependency on fragile joint ventures, and are pushing for policies that require stronger due diligence and contingency planning for large-scale green industry projects.
For now, Novo Energy is maintaining a skeletal crew to continue limited operations and oversee the completion of its factory’s first construction phase. But the outlook for employee morale and long-term labor relations remains clouded by uncertainty.
A Turning Point for Volvo’s Battery Strategy?
Amid the turmoil, Volvo Cars is reportedly evaluating new battery joint ventures outside Europe, particularly in North America. This shift in focus could be a strategic response to both the failure of its European initiative and the changing dynamics of the global auto industry, where U.S. policy incentives like the Inflation Reduction Act are drawing manufacturing projects across the Atlantic.
Such a pivot would mark a significant departure from Volvo’s earlier commitments to homegrown European production. It may also reflect a broader trend among automakers who are recalibrating their EV strategies to mitigate regional risks and diversify their supply chains.
Industry analysts note that Volvo’s next moves will be critical not just for its own future, but for the broader European EV ecosystem. The fate of Novo Energy—and by extension, the continent’s dream of battery independence—may hinge on whether the automaker can identify and align with a new, capable partner.
Lessons from Collapse: Risk in the EV Supply Chain
Novo Energy’s plight offers a cautionary tale for the entire EV industry. It underscores how heavily new ventures depend on the stability of their partners, and how vulnerable they are to disruptions in the value chain. Northvolt’s failure created a domino effect, disrupting operations, derailing timelines, and upending business plans that had taken years to assemble.
In hindsight, Novo Energy’s reliance on a single technology provider appears risky, if not reckless. The absence of in-house R&D and manufacturing capabilities meant that when Northvolt fell, there was no fallback. Going forward, industry experts stress the importance of diversification—not just in partners, but in geographies, technologies, and funding sources.
The Road Ahead: Survival First, Growth Later
As of now, Novo Energy is in a holding pattern—focused on preserving what little momentum it has left while continuing to search for a savior. Clarke remains hopeful that the company will eventually find a path back to full-scale operations, but acknowledges that timelines are being re-evaluated and goals may need to be adjusted.
For the 150 workers who will be laid off, however, the damage has already been done. Promised jobs in one of Europe’s most ambitious green energy projects have vanished, leaving behind disappointment and a sense of betrayal.
In many ways, Novo Energy’s current situation captures the fragility of the EV transition. Beneath the promises of a cleaner future lie real-world complexities—economic, geopolitical, and technical—that can bring even the most promising ventures to a halt.
Whether Novo Energy can rise again, or whether it becomes a cautionary footnote in Europe’s battery story, will depend on decisions made in the coming months. For now, the company is clinging to hope and rebuilding its future—one cautious step at a time.