This analysis was first published in SvD Näringsliv, in Swedish, on February 25th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Is battery maker Northvolt headed for the stock market? The answer may lie in the company’s history. Its CEO has learned a great deal from his former employer — Tesla.

Tall and distinguished, Peter Carlsson stood in the reception of Tesla Motors in Fremont, California, welcoming Svenska Dagbladet.

That was ten years ago, when Carlsson was head of supply chain at the now world-famous electric vehicle company.

“It’s a bit easier here now that we’re turning a profit. It’s easy to forget how tough things were for a long time,” he told SvD at the time.

Tesla’s journey would get both better and worse from there.

The small quarterly profit the company had posted for the first time was the exception, not the rule. But turning a profit wasn’t the primary goal for Tesla at that stage. They were going to grow — and the world was going to be electrified. The profit would come later.

Eventually the stock market came around to that thesis, though it took a little while.

Tesla’s stock was trading at around $12 back then. Today it sits above $200. The price climbed steadily before exploding upward around 2020, when the pandemic took hold of the world.

The market still believes in Tesla and its electrification plans — and believes in them far more than in the traditional automakers making a similar transition. Tesla is today worth roughly thirteen times more than Ford, or eleven times more than General Motors.

Today, Peter Carlsson is back in Sweden, at considerably more northerly latitudes than his California years. He is CEO and co-founder of battery company Northvolt, which is building factories in Skellefteå and Borlänge, among other places.

Reports surfaced recently — again — that Northvolt is planning a stock market listing.

It’s hard not to think about what the man in that Fremont reception learned there. About how he watched and worked at a company with large factories that managed to break free from every association attached to its own product category.

Tesla was not — and is not — seen as just another car company.

Northvolt, with a rumored valuation of around 200 billion kronor, clearly doesn’t want to be seen as just another battery factory either.

Can Carlsson do for batteries what Musk did for electric vehicles?

Creating your own product category is a well-worn strategy, whatever industry you’re in.

In the US there’s a classic pizza advertising slogan: “It’s not delivery, it’s DiGiorno.” Beyond the neat wordplay, it positions DiGiorno’s frozen pizzas as tasting like they were delivered fresh — but straight from your freezer. It’s not an ordinary frozen pizza. It’s something entirely different — it’s DiGiorno. A category of its own, if you take their word for it.

Among brand consultants in the early 2000s, you’d often hear about “blue ocean strategy.” A few hardy survivors still invoke it today.

The idea is to find a segment of the market where you can be perceived as entirely alone as a company — as opposed to a “red ocean,” bloodied by fierce competition between all the players. In a blue ocean, you don’t have to compete. You can instead position your brand or product as something entirely unique.

One immediate effect of this: no price comparisons. What should something cost that no one has seen before?

Apple did this with the iPad. It was an entirely new product category — a blue ocean — that admittedly resembled both a smartphone and a laptop, but was neither. Apple called it a “tablet,” but Swedish families quickly came up with their own name: “padda” — literally “toad,” a play on iPad. The product came to define the entire category, and for many years had free rein to set its own pricing.

That this works with a technology product is no coincidence.

Nowhere are favorable associations more readily given than in the tech sector.

A company can overnight be perceived as modern, innovative — and more highly valued — simply through that association.

Just shifting a business model to selling software via subscription — so-called SaaS (software as a service) — can automatically change how a company is valued on the stock market. One study found that SaaS companies sold on average for 71 percent more than comparable companies selling traditional software.

The Bessemer Cloud Index tracks how SaaS and cloud companies are valued. Despite a steep decline since 2021, the median valuation still sits at around 6.5 times the previous twelve months’ revenue. Compare that to Cisco, a more traditional hardware and software company, where the equivalent figure is around 3.7.

Associations therefore play an enormous role in how a company is judged and valued. What might look like cosmetic branding layered on top of a core business has proven to be anything but.

So how do you make sure you attract the right associations?

Let’s go back to Västerbotten and Skellefteå.

There you’ll find what Northvolt calls “Europe’s first home-grown gigafactory.” What is a gigafactory? Simply a factory that produces batteries for electric vehicles.

The term was coined by Tesla, which named its equivalent factories with a “giga” prefix early on. It’s now become a term others have adopted too. But the association with Tesla remains, of course. And “gigafactory” does sound better than “battery factory.”

Even in Northvolt’s vision statement, something larger than just batteries is implied. They talk about wanting to make “sustainable, high-quality battery cells and systems.”

The word “systems” almost certainly didn’t land there by accident.

It’s true that Northvolt does have software and artificial intelligence components among its products. And what they’ve built shouldn’t be trivialized in any way.

But they are — whatever the framing and sophistication — primarily an industrial company. They build factories that make batteries, plain and simple. And that’s perfectly fine.

The investments and orders flowing to the company make it abundantly clear that demand for exactly this is high. The more interesting question may be how you should value a company with that kind of business.

Speaking to Dagens Industri, Peter Carlsson played down the prospects of a near-term listing:

“Not right now, at any rate. That market is dead.”

But the addendum came quickly:

“We will need to do an IPO at some point to continue with our big expansion plan.”

The IPO market is undeniably dead right now. In the Nordics, listings fell 77 percent in 2022 compared to the year before. But it’s also in the nature of things that you don’t talk openly about your capital-raising plans until you’re ready to launch them.

Listen carefully to what Carlsson is saying and you can hear clearly that Northvolt needs to get ready for a listing — they just want the macro environment to be a little more favorable when they go out.

If the Reuters report of a target valuation of around 200 billion kronor is accurate, the market conditions may matter somewhat less. We’re talking about high valuations by any measure.

The company’s last major funding round was in 2021, when the valuation stood at around 124 billion kronor, and they topped it up before summer with a convertible bond worth an additional 12 billion.

Building industrial capacity takes enormous capital. Going public is one way to solve that financing challenge. And when you’ve watched, up close — as Peter Carlsson has — how a public company can take on a life of its own with the right associations, the logical next step is clear. If he can bring some of the tech world’s luster and Tesla mystique into the stock, it’s hard to see this as anything other than an inevitable move in the near term.

A company with factories producing electric products for a world in the middle of a green transition. Whose valuation has become quietly astronomical compared to its competitors. Why not? It’s happened before.

In a place Peter Carlsson knows well. In Fremont, California.