Novo Energy, the battery subsidiary of Swedish automaker Volvo Cars, will terminate 50% of its workforce-approximately 150 employees-as part of a drastic cost-cutting strategy triggered by the bankruptcy of its former partner, Northvolt. The layoffs follow months of financial strain and failed efforts to secure a new technology partner to replace Northvolt, which co-founded the joint venture in 2021.
The Gothenburg-based company, established to produce batteries for Volvo’s electric vehicles, had already reduced its staff by 30% in January 2025. The latest cuts mark a critical phase in Novo Energy’s survival efforts, with operations scaled down to a “limited” capacity as it finalizes the initial construction of its factory. CEO Adrian Clarke described the decision as “incredibly hard” but necessary, citing unsustainable market conditions and the collapse of Northvolt, once hailed as Europe’s battery industry hope.
Northvolt’s Downfall Leaves Novo Energy Stranded:
Northvolt’s bankruptcy in March 2025 dealt a fatal blow to Novo Energy’s original business model. The two companies had partnered to build a 50 GWh battery plant in Gothenburg, leveraging Northvolt’s expertise in cell manufacturing. However, Volvo Cars took full control of Novo Energy in February 2025 after acquiring Northvolt’s 50% stake for a nominal fee. The separation left Novo without critical technical know-how, forcing it to seek a new partner-a search that remains unresolved.
“Without Northvolt’s technology, we lack the foundation to operate at our intended scale,” Clarke admitted. The bankruptcy also halted financial support from Northvolt, which had been struggling with liquidity issues across its global ventures. Industry analysts note that Novo Energy’s dependency on external partners for cell production-a gap it never filled internally-left it vulnerable when Northvolt imploded.
Volvo’s Broader Financial Crisis Hits Workforce
The Novo Energy layoffs coincide with broader austerity measures at Volvo Cars, which reported a 5% reduction at its U.S. plant in Ridgeville, South Carolina. The automaker’s “cost and cash action plan,” spearheaded by CEO Hakan Samuelsson, aims to offset declining revenues and shifting trade dynamics, including tariff impacts. Volvo’s spokesperson emphasized balancing investments with “the need to reduce costs and improve efficiency,” but the cuts highlights deepening challenges in the electric vehicle (EV) sector.
For Novo Energy, the workforce reduction is part of a larger reorganization to stay afloat. The company will maintain minimal operations to complete the first phase of its factory construction while exploring long-term solutions. Union negotiations in Sweden are ongoing, though the scale of layoffs suggests no immediate resolution to Novo’s partnership void.
Uncertain Future for Europe’s Battery Ambitions:
Despite the turbulence, Novo Energy insists its goal to produce batteries in Gothenburg remains intact. The company aims to resume large-scale activities with a new technology ally, though industry observers remain skeptical. The original plan to begin production by 2026 is now seen as unrealistic, with no clear timeline for revival.
There are greater consequences for the region’s green energy transition from the collapse of Northvolt, a leading European battery startup. If regional businesses like Novo Energy are unable to rebound, Europe may become even more dependent on outside battery suppliers, especially those in Asia. Volvo Automobiles, however, is still looking into joint ventures in North America, suggesting a possible shift away from European-focused tactics.
The difficulties faced by Novo Energy serve as a reminder of the EV supply chain’s vulnerability and the dangers of depending too much on a single partner. The future of Volvo’s battery ambitions depends on finding a suitable partner as soon as possible, given the economic challenges facing the automotive sector. With 150 workers paying the price for a business that was ruined by the collapse of its co-founder, the focus is currently on survival.
