Sweden's cash-strapped electric car battery maker Northvolt said on Monday it would cut a quarter of its staff in the country, as it struggles with strained finances and a slowdown in demand.

The loss of 1,600 jobs in Sweden comes as electric car sales slump in Europe and the continent lags far behind China in battery production.

"While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate," Northvolt CEO Peter Carlsson said in a statement.

He added that Northvolt needed to "focus all energy and investments into our core business."

Northvolt, which warned on Sept. 9 that cuts were coming, said that following "initial steps" of a strategic review it estimated that proposed cost-saving measures would result in about 1,000 redundancies at its primary Skelleftea plant – where an expansion project would be suspended – another 400 in the city of Vasteras and 200 in the Swedish capital Stockholm.

"The rescoping of operations is critical to ensure a sustainable operation and cost base," Northvolt said.

It added that "to achieve this a workforce reduction of approximately 20% at a global level, and 25% in Sweden is required."

The company employs 6,500 people, according to its website.

In mid-September, Swedish Prime Minister Ulf Kristersson said the government had no plans to intervene to rescue Northvolt.

Since its creation, the Swedish company has secured $15 billion of credit and capital.

Northvolt has been seen as a cornerstone of European attempts to catch up with China and the United States in the production of battery cells, a crucial component of lower-emission cars.

Europe accounts for just 3% of global battery cell production but has set its sights on 25% of the market by the end of the decade.