Northvolt, the Swedish battery manufacturer founded in 2017 by former Tesla supply chain leader Peter Carlsson, has been considering building a factory in North America for some time. Now, according to a report by The National News, the company has selected a site in Saint Basile le Grand, a community located about 25 kilometers east of Montreal, for the site of its first battery factory outside of Europe.
The first question many readers will have is, Why is Northvolt not building the factory in the US, where production credits made possible by the Inflation Reduction Act can be worth billions of dollars? In addition, those credits never expire. Although, a change in control of Congress or the White House could change all of that. The answer is that Canada is matching the incentives available under the IRA, and then some.
In addition, by choosing Quebec, Northvolt will benefit from the province’s abundant supply of low-cost, zero-emissions hydroelectricity. The company says its goal is to build the greenest batteries on the planet. Operating the new factory on renewable energy would help make that goal a reality.
The Trudeau administration is eager for Canada to become a major link in the electric vehicle supply chain and is putting its money where its mouth is. Volkswagen announced a few months ago that it would build a battery factory in Canada as well and for the same reasons. Both the federal and local governments are putting up big bucks to lure new businesses to Canada.
While the batteries manufactured by Volkswagen and Northvolt won’t get any production credits from the IRA, they will (potentially) allow the electric cars that use them to qualify for the full US EV tax credit, provided both their battery materials and components meet IRS eligibility rules. They better, if Northvolt hopes to find customers for the batteries it manufactures in Canada.
The National News is quick to point out this is not a done deal, although a final announcement is expected in the next few weeks. For the moment, Northvolt spokesperson Anders Thor will only say, “Northvolt is currently doing a site study in North America, analyzing multiple possible locations in the US and Canada. This process is still ongoing and no final investment decision has been made. The municipalities mentioned (Saint Basile le Grand and McMasterville) are indeed included on the long list of locations we have been studying across North America, and have therefore been published by us in the public records.”
According to Electric Autonomy Canada, a search of government websites in all Canadian provinces shows activity by Northvolt only in Quebec. Under Canadian law, all lobbying efforts must be publicly disclosed — an idea that the United States would do well to copy. If the Northvolt factory does get built in Canada, it would represent of the largest private sector investments ever in Quebec, which is Canada’s second most populous province.
Northvolt, which has just started delivering battery cells to customers like Volkswagen, BMW, and Volvo, says it plans to manufacture more than 150 GWh of batteries annually for its automotive customers by 2030. All three of those companies currently manufacture vehicles in the United States.
The Cuberg Corollary
In 2021, Northvolt acquired Cuberg, a Stanford University spinoff that specializes in high-energy-density batteries for the aviation industry. While there is no official word that any Northvolt factory in Quebec would manufacture such high-energy-density batteries, Electric Autonomy Canada, in its sleuthing of official records, did discover that Cuberg is pursuing its own lobbying activities.
At the federal level, the company says, “Cuberg is looking to collaborate with the federal Government in order to identify potential policy, regulatory support and funding that would enable potential expansion plans in North America and build and operate battery factories (design, development and production of batteries).” At the provincial level, it describes its activities as “exploring the possibility of building and operating battery production in North America, and is therefore in communication with Quebec to identify potential sites in the region.”
At the time of its purchase by Northvolt, Cuberg said in a press release that its “cells deliver more than 70 percent increased range and capacity versus comparable lithium ion cells designed for high rate electric aviation applications. The new technology will be deployed at scale in electromobility markets within three years, beginning with electric aviation.” We have recently reported on two companies that are close to starting air taxi services, a field that several companies think offer significant new business opportunities.
Canada Pension Manager Invests In Northvolt
It’s probably just a coincidence — or maybe not — that just a few days ago, the Investment Management Corporation of Ontario, a pension management firm, invested $400 million into Northvolt, which will help it expand production of lithium-ion batteries ahead of a possible initial public offering.
According to Reuters, IMCO manages more than $73 billion in assets, including stocks, bonds, real estate, infrastructure, and private equity. It was formed seven years ago after Ontario decided to pool the province’s public sector pension plans in order to give the new company the leverage to buy assets directly or alongside key investment partners, including Blackstone, Brookfield, and Carlyle.
Matthew Mendes, IMCO’s head of infrastructure, said the Northvolt investment was examined jointly by his team and IMCO’s public equities managers. “We think there is a really strong story that will resonate with public investors (if Northvolt lists),” he said, citing the company’s competitive advantage, long-term contracts, and low-carbon supply chain.
“Northvolt really fits with a lot of the trends we are trying to invest in,” Rossitsa Stoyanova, IMCO’s Chief Investment Officer, said in an interview, referring to themes including the transition to a lower-carbon economy and the restructuring of global supply chains. “Whether (Northvolt) goes public or stays private, we’ve done our homework and we are happy with the investment.” She added that strong policy support in Europe for the shift to electric vehicles and the onshoring of manufacturing made Northvolt particularly attractive.
A Northvolt spokesperson said the company hoped to reveal “the next steps in our financing plan in the near future.” Northvolt, valued at $12 billion in 2021, has been in talks with banks about an initial public offering that could value it at more than $20 billion, sources told Reuters earlier this year.
Northvolt may not be one of the giants of the battery industry, like CATL and LG Energy Solution, but it is scaling its technology quickly and poised to become an industry leader despite its relatively small size. By contrast, Tesla plans to produce 500 GWh of batteries at its Gigafactory 1 in Nevada by 2030.
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