Volvo Cars Pauses Novo Battery Project

Sweden's Volvo Cars has halted operations at its battery startup Novo Energy, which had already been sharply scaled back, as its search for a partner drags on, Novo Energy said on Tuesday.

The move comes as several battery projects in Europe have been cancelled or delayed over the past two years amid spiralling costs and slowing demand for electric cars.

The Novo factory has been in limbo for more than a year as Volvo Cars seeks a new technology partner following the collapse of Swedish battery maker Northvolt, which co-founded Novo Energy with Volvo in 2021.

Novo chair Alexander Petrofski, who also heads Volvo Cars' small car programmes, told Reuters that talks with multiple battery makers remained active and the pause was driven by cost pressures rather than the progress of discussions.

"Carrying those costs and carrying that entire operation, we don't look upon as viable currently," he said.

The pause means that all remaining 75 jobs at Novo are being cut, after the workforce was halved in May last year.

Amid China's dominance in battery production, industry players have urged the European Union to step up support for battery manufacturing investment.

Brussels recently announced a new automotive package, which included some incentives for local battery production.

Petrofski said additional EU support would be vital to revive the project.

"Our technology partners, the ones we are talking to, that's one of the questions they ask us - what are the prerequisites for getting financial support within the EU for establishing production? So it's really, really important,” he said, adding that credit guarantees were essential for financing.

Elsewhere in Sweden, US startup Lyten is trying to resurrect Northvolt's battery factory in the city of Skelleftea after buying the operations last year.

Swedish truckmaker Volvo Group's planned battery factory in Mariestad has also faced heavy delays.

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