FRAZZLED: Tax-funded EV fantasies shattered as Northvolt collapse shocks Québec politicos

Worthless.

That’s how much the government of Québec now says its ‘investment’ of public tax dollars in EV maker Northvolt is worth as its publicly funded EV ‘strategy’ — and the federal Liberal government’s — lies in tatters.

That’s because Québec’s $270 million stake in European battery maker Northvolt’s parent company is now officially worth zero, the provincial government confirmed Wednesday. It’s a devastating admission for a project once championed as a pillar of Canada’s green industrial strategy. 

“We estimate that the value of this amount is lost,” Economic Development Minister Christine Fréchette said after the Coalition Avenir Québec released its budget on Wednesday. 

In short, taxpayers were tased.

The losses are just one piece of a staggering $2.9 billion injection from both Québec and Ottawa, which also saw the Caisse de dépôt et placement du Québec (CDPQ) inject $200 million of public pension funds into the struggling Swedish firm.

The downfall of Swedish battery giant Northvolt is the latest in a string of government-backed EV failures, exposing billions in taxpayer-funded gambles that have evaporated as business realities take hold. 

In Canada, where politicians of all stripes rushed to subsidize green energy projects, Northvolt’s collapse could — and should — become a central issue in the upcoming federal election, especially as the auto sector reels under US president Donald Trump’s newly imposed 25% tariffs on Canadian-made vehicles.

Northvolt filed for bankruptcy in Sweden on March 12, leaving its North American operations in limbo. While its Canadian subsidiary remains technically solvent, its future is now in the hands of Swedish court-appointed trustees, raising serious doubts about whether the much-hyped $7 billion battery plant in Québec will ever be built.

Northvolt’s failure is part of a broader reckoning for the EV industry, where political enthusiasm has repeatedly collided with market headwinds. 

Governments, eager to claim leadership in the so-called “green economy,” poured billions into EV projects based on optimistic forecasts that have failed to materialize. With consumer demand cooling, rising capital costs, and mounting supply chain disruptions, many of these ventures —including Northvolt — are now crumbling before their very eyes.

Despite clear warning signs, Canadian officials remain in a state of denial. 

As recently as November 2024, after Northvolt sought creditor protection under US law, Québec Premier François Legault and federal ministers — including newly sworn Finance Minister François-Philippe Champagne — assured the public that the Northvolt Six battery factory near Montreal was still on track. 

But the company’s financial woes only deepened even as other major automotive sector players scaled back and recalibrated their respective EV strategies: BMW cancelled a multibillion-dollar battery order due to repeated production delays while Volkswagen and Goldman Sachs, Northvolt’s largest backers, wrote down their stakes. 

Even IMCO, Ontario’s public pension fund, quietly wrote down its $400-million investment in the company.

The timing of Northvolt’s failure could hardly be worse for Canada’s governing Liberals.

Trump’s March 26 decision to impose 25% tariffs on Canadian-made vehicles has already sent shockwaves through the auto sector. And now the collapse of a marquee green energy project adds another layer of instability.

Québec’s opposition parties are framing Northvolt as the latest example of political wishful thinking trumping economic reality. 

Parti Québécois MNA Pascal Paradis accused the government of misleading the public about Québec’s investment in Northvolt, calling out Premier Legault for falsely claiming the province had collateral in Sweden. 

“The premier claimed in the House that we had a plant in Sweden as collateral. That’s not true,” Paradis said. “Minister Fréchette claimed that Québec had guarantees and a truly privileged status in the event of bankruptcy. This is not true.”

The ruling Coalition Avenir Québec maintains that the $240 million loan secured by Northvolt’s land in Canada remains protected as ‘collateral’ that will cover the losses. But with Northvolt scrambling to secure $1.29 billion just to stay afloat through 2027, even the fate of its North American assets is uncertain.

At a broader level, the Northvolt fiasco serves as a cautionary tale about the risks of government-driven industrial policy, where ambitious public investments often ignore the brutal realities of global markets. As consumer demand stagnates and financing challenges mount, Northvolt is unlikely to be the last high-profile casualty.