(Adds source, Northvolt comments, details, background)
By Esha Vaish and Arno Schuetze
STOCKHOLM/FRANKFRURT, May 13 (Reuters) - Volkswagen truck brand Scania has signed a battery supply deal with Sweden’s Northvolt and is in talks about making an equity investment as part of the startup’s efforts to raise 1.5 billion euros ($1.68 billion), Scania’s head said on Monday.
Chief Executive Henrik Henriksson told Reuters he could not disclose exactly how much capacity Scania had secured from Northvolt, which said earlier this year that it had sold roughly half of its planned 32 gigawatt capacity a year by 2023.
“It’s a substantial part,” he said.
“There will be a shortage of batteries for the automotive sector globally in the coming five to six years because there’s simply not enough capacity. So the more capacity we can get our hands on, the better we feel,” he added.
He said Scania had picked Northvolt because the start-up’s business model of developing cells in collaboration with customers meant they could focus on creating batteries specifically for heavy vehicles, rather than relying on current models geared towards cars.
Electric cars tend to draw on their batteries for “a couple of hours a day, while our vehicles are running 24/7,” he said.
“We are trying to tailor (the battery to) make it more (suitable) for our vehicles,” he said.
He said discussions were ongoing on eventual take-up size.
“We’re participating in both the discussions about how to secure future capacity and volume commitments, and also, when it comes to equity and the like, the capital structure going forward,” Henriksson said.
Northvolt’s plans, which include a potential second factory in Germany, are seen as a central part of Europe’s effort to compete with Asian rivals, which have gained a lead by locking in supply deals with carmakers.
The company, founded by former Tesla executive Peter Carlsson, is looking to spend 3 billion euros to build Europe’s biggest battery cell plant in Sweden, a project to rival U.S. electric carmaker Tesla’s Gigafactory.
It is currently raising 1.5 billion euros in equal parts of debt and equity and has asked the European Investment Bank for a 350 million euro loan.
It had previously raised in excess of its 80 million to 100 million euro target last year, with contributions from Scania, engineering group ABB, wind turbine maker Vestas and energy firm Vattenfall.
It later secured some funds from German engineer Siemens and carmaker BMW.
A person familiar with the matter said that Vattenfall had agreed to discuss battery orders and provide equity, while ABB had signed a memorandum of understanding to participate.
Atlas Copco, Husqvarna, Vestas , Volvo Cars, Jaguar Land Rover, Daimler , and BMW were in advanced talks over the volumes of batteries they will order from the factory, the source said.
Meanwhile Wartsila, Siemens, E.On, Ikea and Volkswagen were in early discussions about their participation, the source added.
The companies declined to comment on the new fundraising and supply talks, or were not immediately available for comment.
Northvolt CEO Peter Carlsson, a former Tesla executive, confirmed Scania’s comments but declined to comment on other points.
“Scania is part of what we call the partnership group,” he said.
$1 = 0.8904 euros Reporting by Esha Vaish in Stockholm and Arno Schuetze in Frankfurt; editing by Jason Neely and Jan Harvey