The last few months have illustrated the immense challenge of scaling next-generation battery technologies.
A chain of setbacks — including QuantumScape being partially sidelined from a manufacturing deal with VW, Varta’s forced restructuring and sale to Porsche, and Ambri’s bankruptcy — culminated last week with Northvolt’s decision to shutter its lithium metal subsidiary, Cuberg.
From its inception at Stanford University in 2015, California-based Cuberg avoided the traditional route for battery startups: the company never raised venture capital, and instead relied on grants and strategic corporate investors like Boeing, which led a seed round in Cuberg’s early days. And, unlike some of its competitors, Cuberg’s exit strategy was acquisition from the start.
Northvolt’s acquisition offer, in late 2019, came earlier than expected. At that time, Cuberg’s team was just 15 people and its tech was still at a very early stage, explained the company’s founder and former CEO Richard Wang.
Northvolt itself, founded just a year after Cuberg, had already raised several billion dollars, including from some of the world’s largest automakers, and was setting out to build several gigafactories across Europe.
“The thesis was that an acquirer like Northvolt would complement us and bring scale and manufacturing capabilities and long-term access to capital,” Wang, who parted ways with the company in February, told Latitude Media.
The sale went through in early 2021, and for the first few years the pair coexisted smoothly, with Cuberg operating as a relatively independent, high-performance innovation and commercial business unit.
Of course, as Wang said, “when you get into the details, nothing is ever quite that simple.”
The promise and problems of lithium metal
The appeal of lithium metal is a potential step-change in energy density. And cells can be manufactured using much of the same infrastructure built out for lithium-ion batteries.
But the tech faces some pretty serious challenges. Chief among them, said Wang, is figuring out how to create a chemical system and a cell design that can reliably and safely manage charging and recharging lithium metal.
Cuberg, for its part, had “mostly figured out cyclability,” he added, and was next focused on improving safety and reducing cost by making the lithium anode, which stores the battery’s energy, thinner and more efficient.
Those are upgrades Cuberg was still working on when it shut down, he added, and the cells coming out of the company’s pilot plant (which opened in California earlier this year) still used relatively thick lithium metal foils, meaning they were still extremely pricey.
The cells produced during the first half of this year were nevertheless viable products for certain niche markets, like advanced aviation, Wang explained.
Targeting end users like electric vertical take-off and landing aircrafts and drones was part of Cuberg’s initial focus. Rather than pursue the EV market — which Wang said is still at least a decade and several billion dollars off for lithium metal specifically — the company focused its commercial strategy on these “stepping stone” markets while working to make up the technical maturity gap.
“I feel validated in our market approach,” Wang added. “I still think it was the most realistic approach given where lithium metal is these days.”
Ben Campbell, who oversees the battery team at research and consulting firm E Source, has a more skeptical view.
“Cuberg was trying to create a breakthrough technology that would work at scale for a market that doesn’t exist yet,” Campbell said.
Many startups rely on smaller markets on the road to the EV industry. But according to E Source data, the aviation space accounted for well under one gigawatt-hour of global battery consumption last year. That’s an extremely small target compared to something like consumer electronics, which consumes closer to 40 GWh, said Campbell, putting Cuberg at a disadvantage compared to companies who did target that much larger sector.
Cuberg was trying to create a breakthrough technology that would work at scale for a market that doesn’t exist yet.
The strategy of not taking VC money could have worked, he added. But getting acquired by Northvolt, a bigger startup, ultimately determined its fate, because Northvolt didn’t have the resources to support Cuberg when it faced its own headwinds.
“That’s really the business model that should be on trial here, is startups acquiring startups,” Campbell said. “If Cuberg had been acquired by a legacy company, they’d still be in business.”
More broadly though, Campbell is skeptical of lithium metal’s ability to ever make a big impact in the EV market, in large part because of safety concerns and the limited data on the tech’s end-of-life characteristics. “The automotive industry is very skeptical and careful of adopting new technologies that might become more dangerous over time and without a lot of data to support their decision to put it in millions of cars.”
The Northvolt take
The challenges with lithium metal, and the distance between the tech and the EV market was something Northvolt was well aware of during acquisition discussions, Wang said.
“Northvolt, being an automotive-oriented cell manufacturer, wanted an automotive product at the end of the road,” he explained. The deal faced some skepticism from Northvolt board members and investors, he added, who weren’t sold on the promise of an aviation-focused company like Cuberg.
But at the time, the appetite for risk was greater, and those skeptics ultimately came around. As Campbell put it, “You don’t want to be the one battery company that doesn’t have a bet placed on what might be the future of battery technology.”
Cuberg kept its name and governance structure, and grew to more than 200 employees at its peak earlier this year.
Within a year of the acquisition, however, Northvolt began facing some serious challenges of its own. Russia’s invasion of Ukraine in early 2022 hampered global supply chains and sent lithium prices soaring. Interest rates began to rise, and the EV market started to slow outside of China.
Amid those headwinds, Northvolt started to fall behind on production. Major contracts were canceled, other deliveries were delayed, and the company reportedly scrapped plans to open a fourth factory in Sweden. Northvolt eventually pushed back its much-anticipated IPO, and instead raised $5 billion to expand an existing plant.
Those compounding challenges made it difficult to operate a subsidiary like Cuberg. Former employees told Latitude Media that it became increasingly hard for Cuberg to access capital and attention over the last two years. According to one employee, the two companies never reached an agreed-upon budget for 2024.
Northvolt’s financial stress was evident to Cuberg employees as early as the beginning of 2023. But late last year, when it became clear that Northvolt didn’t have the resources to maintain its lithium metal enterprise, Cuberg worked to find additional financing, in the form of a minority spinoff, the employee said. In that scenario, a strategic investor could purchase a small percentage of the company in order to help sustain its growth.
Ultimately, that proposal ran into severe internal opposition at Northvolt, which “didn’t want to send signals of weakness to the market” at a time when they were attempting to build momentum and raise money themselves, the employee said.
The Cuberg legacy
In its August 20th announcement, Northvolt said it was shifting development of its lithium metal technology from California to its research and development campus in Sweden, in an attempt to “consolidate the R&D and industrialization of Northvolt’s cell product portfolio…into one location.”
In an email to Latitude Media, Northvolt added that the decision was part of the company’s “broader strategic review,” which is coming in the fall. A total of 192 Cuberg employees were impacted, the company said, with others offered opportunities in Sweden.
None of the intellectual property subject to oversight from the Committee on Foreign Investment in the U.S. (which oversaw the acquisition) is being transferred out of the country, Northvolt clarified; “Northvolt is in close contact with U.S. authorities on this matter.”
That IP aside though, the move to Sweden will mean Northvolt’s lithium metal ambitions will have access to “a world-class team of more than 800 experts” as well as the company’s customer-facing teams and production units, Northvolt said.
Campbell, however, isn’t convinced lithium metal is on the roadmap for Northvolt for at least the next decade.
“They have enough other things to worry about, and more realistic options to pursue when it comes to next-gen battery tech that might have a shorter-term impact on their cell energy density and cost improvements,” he explained.
And, even if they do pursue it, they’ll be facing an uphill R&D battle: “All their knowhow just walked out the door,” he added. “I think it’s the end of lithium metal at Northvolt.”
The move, however sudden, wasn’t entirely a surprise to Cuberg employees. As one former engineer explained, motivation and morale had been low in the wake of Wang’s departure. “We didn’t know what was happening, but something seemed imminent,” they said. “Looking at the broader battery community and what has happened to other startups though, this isn’t totally unexpected,” they added. “We were making good progress on maturing aspects of our technology. We just needed a little more time.”
Both Wang and Campbell see Cuberg’s closure as the sign of a shakeout in the battery industry, driven in part by the changing investor landscape, but also by China’s growing dominance in the space.
“China [is] crushing everyone on cost because of their subsidies, overcapacity, integrated supply chains, and overall maturity of their industry compared to the U.S.,” Wang explained. “Without significant policy intervention…we are well on our way towards seeing an implosion of the battery technology industry in the U.S. over the next couple years, and with a lot of these technologies being acquired for pennies on the dollar and taken overseas.”
Ultimately, the years of trial and error needed to get lithium metal to scale in the U.S. just aren’t attractive to investors, Campbell said. “If it eventually works, it will be a huge step, but it’s something you have to be patient for.”
