The Swedish battery cell maker Northvolt has received a $525 million loan guarantee from the German government for a pilot plant.
Northvolt, set up by two former Tesla executives, has assembled more than $3 billion in debt and equity to finance production in its native Sweden, targeting battery-cell output equal to about 40 gigawatt-hours of capacity.
The company said it is aiming for a 25 percent share of the European battery market, which has been dominated by Asian companies, including LG Chem, Samsung and Contemporary Amperex Technology Co.
Last month Northvolt announced that it had raised $1.6 billion in debt financing from a group of banks, pension funds and other public institutions. It raised $1 billion in equity capital in 2019 from investors including BMW Group and Volkswagen Group.
The guarantee from the German government is a stepping stone to Northvolt’s plan to operate with VW a “Northvolt Two” plant in Salzgitter, Germany, from 2024, the country’s Economy and Energy Ministry said in an email Monday.
Northvolt signed a $2.3 billion battery order with BMW last month, becoming the automaker’s third major supplier for the technology, along with China’s CATL and South Korea’s Samsung SDI.
Northvolt’s plans show confidence in the potential of Europe’s electric vehicle market. The market for the cells, the basic components of electric vehicle battery packs, may grow to at least 250 billion euros ($296 billion) by 2025, according to European Commission estimates.
Western Europe’s electric vehicle sales pulled ahead of China’s last month, helped by subsidies in Germany and France that have been raised during the coronavirus crisis.