Volkswagen plans to build enough cells to cover half of its global battery needs in the long term and become a global supplier through PowerCo.
As the European Union decides what to do with combustion engines in 2035 and whether they will eventually be banned, Volkswagen wants to become the world’s supplier of batteries, with an ambitious long-term plan to reduce cell costs.
As Volkswagen’s technology chief, Thomas Schmall, explained to Reuters, the plan consists of investing in mines to lower the costs of the raw materials necessary for the manufacture of electric car batteries, in addition to satisfying half of its own demand and sell to third-party customers.
In this way, the German manufacturer wants its PowerCo battery unit, created in 2022, to not only produce batteries to meet the group’s needs, but also to become a global supplier for other manufacturers. This company aspires to invoice 20,000 million euros per year by 2030.
In the long term, Volkswagen plans to build enough cells to meet half of its global battery needs, with most of the production capacity located in Europe and North America.
Schmall has confirmed that PowerCo will begin supplying cells to the 1.2 million vehicles Ford is building in Europe on Volkswagen’s MED platform.
Volkswagen wants to become a global supplier of batteries and this is his plan
This is an ambitious roadmap, as manufacturing or sourcing batteries at a reasonable cost will be key for automakers as they seek to produce electric cars at a more affordable price.
Few automakers have disclosed direct stakes in mines, but many have struck deals with producers to source materials such as lithium, nickel and cobalt and pass them on to their battery suppliers.
Production will begin in 2025 at the PowerCo plant in Salzgitter, Germany, in 2026 in Valencia and in 2027 in Ontario (Canada).
Objective: reduce costs
The five-year plan presented by Volkswagen contemplates an investment of 180,000 million euros, of which 15,000 million will go to its three announced battery plants, including the one in Valencia, as well as the acquisition of some raw materials.
For the moment, the company has secured the supply of raw materials until 2026 (when the German and Spanish plants will come on stream) and, in the coming months, it will decide how to meet its demand thereafter.
On the other hand, it has also allocated another 14,000 million euros in batteries to the Swedish Northvolt plant. As Schmall points out, “getting battery costs even lower is a challenge and we are using all the instruments with PowerCo”.
Asian producers such as CATL, LG Chem and Samsung SDI dominate global cell production, with almost half of planned battery cell capacity in Europe in the hands of Asian operators.
Half of PowerCo’s staff are industry veterans from Asia, Schmall acknowledged, allowing the battery unit to enter the industry at the top of the learning curve.
