An electric vehicle charging station is seen at the Volkswagen display during the media day at the Canadian International AutoShow in Toronto, Ontario, Canada, February 14, 2019. REUTERS/Chris Helgren
Northvolt is leading Europe's charge to build its own battery industry to meet rising demand for electric cars © Reuters

Northvolt, the Swedish battery start-up, has raised €350m from the European Investment Bank and is set to receive further funding from Ikea.

The Swedish group, which was founded by two former Tesla executives, is looking to raise a total of €1.5bn to help it build a battery factory in the north of the country close to the Arctic Circle.

Northvolt is leading Europe’s efforts to build its own battery industry to meet rapidly rising demand for electric cars and energy storage systems. Almost all of the world’s batteries are made by a handful of Asian companies who have already received hefty orders for future battery supplies from global carmakers.

Volvo Cars said on Wednesday it had signed a multibillion-dollar deal to buy electric car batteries from Chinese battery manufacturer Contemporary Amperex Technology (CATL) and South Korean chemical group LG Chem.

Northvolt said it aimed to raise half of the €1.5bn in the form of debt and the rest in equity. The fundraising will help it build the first phase of its battery factory in Skellefteå, which will produce 16 gigawatt hours of batteries per year, enough to supply hundreds of thousands of cars. It aims to eventually reach 32 GWh of battery production at full capacity.

Stichting Imas Foundation, the manager of the financial assets of the foundation that owns retailer Ikea, was in the last leg of talks over an investment but the discussions could still fall through, Ikea said.

It is not known how much Ikea would invest but it would join a wide array of European industrial groups who have backed Northvolt, including carmaker BMW; engineering companies Siemens and ABB; truckmaker Scania; and wind turbine manufacturer Vestas.

An investment in Northvolt would fit Ikea’s growing emphasis on sustainability with the retailer aiming by next year to produce as much renewable energy of its own as the power it consumes in its operations.

To lower costs Northvolt plans to make its own battery cells in Stockholm, which will then be assembled into batteries at the factory in the north of the country. A further plant in Poland is expected to be built to assemble lithium-ion batteries into battery modules for customers.

However, Northvolt faces competition from the Asian battery giants who are also setting up factories in Europe. LG Chem is building a battery plant in Poland while China’s CATL has said it would build a battery factory in Germany.

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