The Swedish battery maker Northvolt is to cut 1,600 jobs in restructuring, in response to “headwinds” blowing through the electric car industry.

The battery company announced redundancies across three of its sites on Monday, including 1,000 in Skellefteå, in northern Sweden, where it is suspending the expansion of Northvolt Ett, Europe’s first homegrown battery gigafactory.

The company, which has been seen as Europe’s most promising contender to China’s battery producers, will also cut 400 jobs in Västerås, in central Sweden, where Northvolt Labs is based, and 200 in Stockholm, home to its head office.

Peter Carlsson, the company’s chief executive and co-founder, insisted that “overall momentum for electrification remains strong” but that “tough” decisions were needed to ensure the company’s future.

Northvolt’s employees have endured weeks of uncertainty over the company’s future amid reports of urgent financial problems and a halt on expenses. Cost-cutting measures, including job cuts, were announced two weeks ago, and the company is also looking for new investment.

Europe’s electric vehicle sector has been struggling as consumer demand for greener vehicles struggles to increase quickly enough. Last week, industry figures showed the number of cars sold in the EU fell to 643,000 in August.

“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. We now need to focus all energy and investments into our core business,” Carlsson said.

“Success in the ramp-up of production at Northvolt Ett is critical for delivering to our customers and enabling sustainable business operations. Recent production records at Northvolt Ett show that we are on the right path, but the decisions we’re taking today, however tough, are required for Northvolt’s future.”

Northvolt, which counts Volkswagen and BMW among its customers, said it would focus on scaling up operations in Skellefteå to produce battery cells with a 16GWh production capacity. The Ett project was expected to provide an extra 30GWh of annual capacity.

All redundancies are “subject to ongoing union negotiations”, the company said.

The cuts are the latest in a wave of job losses sweeping the industry, including 14,000 announced by Elon Musk’s Tesla earlier this year and thousands linked to potential factory closures by Volkswagen in Germany.

Separately, the Swedish broadcaster SVT reported on Monday that faulty pipes at Northvolt’s factory in Skellefteå, which is close to the Arctic Circle, have leaked a toxic chemical used in battery manufacturing because the facility was not built to withstand the cold.

In response, Northvolt told the broadcaster that the company makes detailed risk assessments, any leaks were not caused by the building’s design, which is built for the climate, and emissions were handled according to permits.

The Guardian has contacted Northvolt for comment.