Summary 

  • Launched in early 2021, Italvolt's battery gigafactory promised to regenerate an abandoned industrial area in Piedmont, northern Italy, create 4000 jobs and mobilise €3.5bn of investment. 
  • Almost two years into the project, the company has yet to complete the purchase of the land, apply for building permits, unlock financing and announce its technological partner. 
  • Founder Lars Carlstrom, who launched Italvolt after leaving Britishvolt, is still buoyant. He also launched Statevolt, a new gigafactory project in California. 
  • With similar delays affecting other gigafactories across the region, the young European battery industry is already facing a credibility issue as results have yet to match initial ambitions. 

When Lars Carlstrom showed up in Scarmagno, in northern Italy, with plans to build one of the largest gigafactories in Europe from the ashes of manufacturer Olivetti’s burned-down site, his odds appeared solid.

It was early 2021; capital was cheap and abundant, the switch to electric vehicles (EVs) was underway and gigafactories were on everybody’s lips. Mild and soft-spoken, Mr Carlstrom embodied the values that Swedish brands have come to be known for – transparency, reliability and sustainability. The future 45 gigawatt hour (GWh), €3.5bn factory designed by Pininfarina, Italy’s best-known automotive designer, along with the promise of 4000 direct jobs, were the icing on the cake. For a community that had been trying to regenerate for years, it was a no-brainer. Everyone jumped on the bandwagon.

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“Abandoned for decades, this area will return to being a source of jobs and wealth,” Alberto Cirio, the president of the Piedmont region, of which Scarmagno is a part, said in February 2021 as the project took its first steps.

Almost two years into the project, the area lies abandoned with no sign of progress. As of December 1, Mr Carlstrom is yet to complete the purchase of the site, apply for building permits and unlock financing. Long-awaited and long-promised details on his technological partner are still pending, too.

All around, the wind has shifted: interest rates are rising, economic uncertainties are slowing down the uptake of EVs and competing gigafactory projects have popped up all over Europe. 

Unfazed by it all, Mr Carlstrom is as optimistic as ever: “It’s all good,” he tells fDi. He even doubled down in April by launching Statevolt, another gigafactory project, in California. The plot seems similar: big ambitions, but few confirmed details.

“In an industry where scale is important, being seen as a big player is important to attract investment,” says Jon Ferris, head of flexibility and storage at research and consulting firm LCP Delta. “But being able to deliver, particularly the first project, is needed to back that up.”

In an industry where scale is important, being seen as a big player is important to attract investment.

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 Jon Ferris, head of flexibility and storage, LCP Delta

‘My guess is as good as yours’  

The term ‘gigafactory’ was coined by Elon Musk when he built the world’s first, in Nevada in 2014. ‘Giga’ is short for ‘gigawatts’ — the typical measure of production capacity at these facilities, but it also captures the enormous scale of these projects. Gigafactories maximise economies of scale and produce in a competitive fashion.

Behind a gigafactory there is always a big vision, and Mr Carlstrom certainly does not lack for that.

“I am a big fan of industrialisation and job creation,” he says in an interview on November 21. “I like to affect change. That’s why we’re choosing areas in decline where our projects can have a huge impact.”

What he seems to be lacking is technical expertise in the automotive or chemical industry, although his résumé features experiences in several investment holdings and start-ups over the past 30 years. He himself believes the nascent European battery industry remains a level playing field, regardless of anyone’s background.

“This is a very young industry, where no one really knows how to do things the right way,” he says. “Not even the original equipment manufacturers (OEMs) know which is the way to go. When it comes to batteries, no one knows. So, my guess is as good as yours.”

When it comes to batteries, no one knows. So my guess is as good as yours.

Lars Carlstrom

He proved this when he co-founded Britishvolt in 2019, the gigafactory in north-east England that was expected to stand at the heart of the UK’s switch to electric mobility. The idea behind this was inspired by a magazine he was reading on a train, when he stumbled upon an article pointing out the need for the UK to set up a gigafactory to rescue the ailing car industry.

Britishvolt had wind in its sails right away. The £3.8bn, 30GWh project captured the imagination of many, to the point that it received a £100m public grant by the government-backed Automotive Transformation Fund to develop its vision. The grant unlocked further financing by logistics real estate fund manager Tritax and its majority shareholder, investment company Abrdn, who put together a £1.7bn private funding package for Britishvolt to develop the site in Blyth.

“Backed by government and private sector investment, this new battery factory will boost the production of EVs in the UK, whilst levelling up opportunity and bringing thousands of new highly skilled jobs to communities in our industrial heartlands,” then prime minister Boris Johnson said in January 2022.

However, things took a wrong turn a few months later, when the company ran out of cash as it missed the milestones set by its backers. It was eventually extended a financial lifeline by commodities trader Glencore in early November, but all its shortcomings came to light: no proven technology, no major customers and a ballooning payroll. 

Its financial backers jumped ship.

“The deployment of any investment was subject to certain conditions and milestones,” an Abrdn spokesperson tells fDi. “These have not been met by Britishvolt, which means we put on hold further investor discussions. No finance has been released or committed by Abrdn (nor Tritax) for the development of the site.”

Whatever the future holds for Britishvolt, Mr Carlstrom is not concerned.

He left the company in December 2020 as the British national and local press picked up on the fact that he had been convicted for tax fraud in Sweden in the 1990s. He argues that the issue had nothing to do with his exit, and he just left because he had “severe collaboration issues” with his partners.

Booming EVs, nascent batteries 

Mr Carlstrom and Britishvolt parted ways at a time when the switch to EVs was starting to gain momentum across Europe.

Major European automakers reset their strategies and announced bold investment campaigns to electrify their production base as the EU unveiled its new ‘green deal’ — a set of policies aimed at making the bloc carbon-neutral by 2050. The market share of EVs in the EU jumped from about 3% in 2019 to above 10% of total registration of new cars in 2020 and almost reached 18% in 2021, according to figures from the European Environment Agency.

Overall, the European EV market is forecast to grow annually by 44.6% between 2022 and 2029, raising its total value from $147.6bn in 2022 to $1.95tn in 2029, according to estimates by research firm Research and Markets, published on November 28.

While Europe has had a traditionally strong automotive industry, it continues to lack a battery industry. China has gained a strong leadership in EV batteries over the years precisely because it struggled to compete in the European- and Japanese-dominated internal combustion engine powertrain market. Beijing also controls much of the value chain of the critical minerals needed for the production of EV batteries — the industrial processing of EV critical minerals is almost exclusively located in China, giving its producers major leverage over their European challengers.

“I don’t think that in the short-term, Europe can challenge China’s leadership with regards to battery technology, costs and environmental impact,” Andrea Taschini, an independent automotive consultant, tells fDi. “As a matter of fact, 80% of the batteries used by OEMs in the EU are produced in China, with critical materials sourced in China. I struggle to understand why China should allow European producers to access processed critical minerals and risk losing the production of the final product itself.”

Benchmark Mineral Intelligence, a specialist information provider for the EV supply chain, estimated earlier this year that China is on course to have 3733GWh of lithium-ion battery cell capacity by 2031, more than double the total capacity (1721GWh) expected in the rest of the world.

However, European policy-makers naturally saw the development of a local battery industry as a way to secure the switch to electric mobility, while breathing new life into the ailing European automotive industry.

And thanks to generous incentive schemes — a rarity in a region that has long waged war against most sorts of state aid — dozens of proposed gigafactory projects popped up all over the region. At least 20 such projects with an annual capacity of more than 30GWh have been announced across Europe — up from a handful before the pandemic. Construction at Swedish Northvolt One, which is considered the first European gigafactory, started in October 2019 and it first delivered lithium-ion battery cells to a leading carmaker in May 2022.

These mushrooming European gigafactories are being developed by several actors: established Asian players, European OEMs and independent battery start-ups.

While most of them are in central and eastern Europe and Scandinavia, there are exceptions. Among them stands Italvolt, the gigafactory project Mr Carlstrom devoted himself to as soon as he left Britishvolt, and one of the few such endeavours being undertaken in southern Europe.

Pieces falling into place?

The 300,000 square metre site in Scarmagno Mr Carlstrom picked for his project is charged with historic value, both for those in the area and beyond. For decades, Olivetti, once Italy’s biggest tech company, produced typewriters and desktop computers there, creating tens of thousands of direct and indirect jobs along the way. The whole local economy was anchored to Olivetti’s fortune. The company’s slow decline that started in the mid-1980s inevitably dragged the local cluster down. Eventually, the site in Scarmagno shut down in 2013, ingloriously terminated by a fire that has made the area inaccessible ever since, as it waits to be cleaned up and reclaimed. 

Its ruins stand as a bitter reminder of the ebbs and flows the local community has experienced since the site was built in 1960. But not for Mr Carlstrom, who saw the opportunity right away.

“The Italian automotive industry is rooted in that area,” he says, referring to the cluster that developed around Fiat, now Stellantis, in nearby Turin since the beginning of the 20th century. “Many quality companies are located there, and we can easily get to markets and clients in France and Germany. Besides, with our gigafactory, we can save thousands of jobs that will necessarily disappear as we transition to EVs. We will have access to many skilled workers.”

There is a catch, though. The site is heavily contaminated with asbestos.

This is no secret — the issue was part of lengthy criminal proceedings against Olivetti’s former management in the 2010s. Now, the clean-up is the only outstanding issue left for Italvolt to deal with. The company’s consultants initially underestimated the reclamation costs, according to Mr Carlstrom, whereas an updated estimate increased the cost tenfold, putting it between €60m and €100m.

“The price [for the land acquisition] is not the thing, because we are not paying much for it,” says Mr Carlstrom, who notes he has already reached an agreement with the landowner. “It’s about identifying the right costs for the clean-up of the area ... If it’s going to cost €100m, it will be one of the most expensive industrial sites in Europe. We cannot have it that way.

“We need some kind of support from local authorities. It’s not our pollution; it is historical pollution.”

Italvolt paid a deposit of €1.2m to the current owner of the area, Italian fund manager Prelios, in  September 2021, the company’s 2021 annual report shows, but the two parties are still negotiating the transfer of the area as of December 1.

Should the land finally be acquired, “the rest of the project is fully [financially] furnished and engineered, we are ready to apply for the building permits”, Mr Carlstrom says, adding that the €1bn needed to build the factory has already been lined up. “As soon as we get issued the building permits, we can access the funds,” he insists.

While he did not disclose the names of his financial backers, he did say the company is applying for funds from Italy’s recovery plan. However, he also conceded that “we will never get as much as Stellantis did in Termoli [where it received €370m to repurpose an existing site into a gigafactory] because we are building a factory in the northern part of Italy [the richest and the least likely to receive big incentives from the recovery fund].”

Italvolt’s technology partner is also unknown as of December 1, although it is soon to be announced, Mr Carlstrom says, as he has regularly repeated since the inception of the project, adding that the company will use NMC811 technology, a type of chemistry used in next-generation batteries. The same applies to any possible customer and off-taker of Italvolt batteries. It also remains to be seen how the company will secure a supply of critical minerals to cater to the needs of the gigafactory, as well as electricity at convenient rates in a country that has traditionally had one of the highest power rates in Europe.

While many of the project’s details are still vague, Italvolt’s 2021 annual report provides something a little more tangible: €6.92m of equity, mostly paid by Mr Carlstrom himself, one employee and one executive (Mr Carlstrom), along with a net loss of €855,000. At first glance, this is a lean structure for a €3.5bn project, but Mr Carlstrom pushes back on that.

“Think of Britishvolt. They hired more than 300 people. That’s not really healthy for a start-up. At the same time, they also started developing their own technology, which is extremely costly. Both things are a huge mistake, and now the project is almost ruined. At Italvolt, we have been working in a different way where we are hiring consultants. We have about 50 consultants working for the company.”

In the meantime, the start of production has been pushed from the spring of 2024 to “late 2025” and the overall job creation reduced by a quarter to 3000 total direct jobs.

Many other gigafactories around Europe are experiencing similar delays and trajectories, which raises credibility issue for the whole industry.

“The whole narrative around European gigafactories is overhyped, which is not necessarily a bad thing,” says Nemanja Mikac, CEO of ElevenEs, a battery start-up based in Serbia, which is developing its product — lithium iron phosphate batteries — before putting together a gigafactory project. “But now that we are closer to delivery, things are getting critical. If the market sees deliveries are not arriving on time and on budget, there will be doubts ... It’s critical to show something, and few non-Asian companies are actually doing that.”

If the market sees deliveries are not arriving on time and on budget, there will be doubts.

Nemanja Mikac

California dreaming 

Mr Carlstrom is still unfazed and oozes self-confidence. When automotive export Michael J. Dunne asked what keeps him up at night during a podcast released in September, he simply answered: “I actually sleep pretty well.”

In fact, he is still very active in chasing new opportunities for the battery industry even beyond Italy. In particular, he is looking at the hottest geography for EVs at the moment: the US.

“In the absence of any further support from the EU, a shift to the US is what we are expecting,” says Mr Ferris, referring to the multi-billion incentive programmes the US administration has unlocked as part of the Inflation Reduction Act and other laws related to the security of strategic industries, such as EV batteries, which are shifting the attention of many in the battery space from Europe to the US.

Despite their hiccups, his Britishvolt and Italvolt experiences were a springboard for Mr Carlstrom to launch Statevolt in southern California’s Imperial Valley. A $4bn, 54GWh “hyper local” gigafactory, it aims to leverage a local ecosystem able to provide the facility with geothermal energy, as well as lithium. Located in another deprived area, the usual flashy rendering of the future factory, combined with the promise of investment and job creation, has already won the local community over.

“The county … believes this is another step towards fulfilling the potential of Lithium Valley for a better and brighter Imperial County,” the Calexico Chronicle reported Jesus Eduardo Escobar, chair of the Imperial Valley County board of supervisors, as saying when the project was announced in April.

In the grand scheme of the global battery industry, the long-term outcome of Mr Carlstrom’s projects matters little. If anything, at the moment there are more projects than the current supply of critical minerals can accommodate.

But for local communities, in particular for the kind of underinvested communities he has chosen to work with, any investment is better than none, even if it is only the promise of further investment.

This article first appeared in the December 2022/January 2023 print edition of fDi Intelligence. View a digital edition of the magazine here.