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.

Swedish battery maker Northvolt filed for Chapter 11 bankruptcy protection in the U.S., delivering a blow to Europe’s electrification ambitions.

"The company will continue to make deliveries to customers, while fulfilling obligations to critical vendors and payment of wages to employees," according to a statement from Northvolt. Read also: EU to back Trump on China trade pressure in exchange for Ukraine support Northvolt filed for bankruptcy in the U.