Northvolt’s ambition was to challenge the dominance of Asian battery makers, such as CATL and BYD in China. The company launched in 2016 with the idea of tapping cheap renewable energy to build lithium-ion batteries for electric vehicles (EVs). It promised 90% less CO 2 emissions compared to cells made using coal power by 2030.

Northvolt's financial collapse deals a blow to Europe's plan to set up its own battery industry to power electric cars, stirring a debate about whether it needs to do more to attract investment as startups struggle to catch up with Chinese rivals.

Volkswage has significantly written down its 21% stake in Northvolt that filed for bankruptcy protection in the U.S. last week.