Volkswagen to invest in mines in bid to become global battery supplier

Volkswagen is investing in mines in an effort to become a global supplier of batteries<br />

Berlin, March 17 (U.S.): Volkswagen (VOWG_p.DE) plans to invest in mines to lower the cost of battery cells, fill half of its own order and sell to third-party customers, a member of the automaker’s board responsible for technology said.

Its strategy is in line with a broader trend of automakers seeking greater control over parts of the supply chain traditionally left to third parties, from power generation to raw material sources, as they compete for scarce resources they urgently need to meet electrification goals.

Europe’s largest automaker wants its battery unit PowerCo to become a global supplier of batteries, as well as meet half of its demand with plants in Europe and North America, Thomas Schmoll told Reuters in an interview.

He said PowerCo will begin delivering cells to Ford (FN) for the 1.2 million vehicles the US automaker builds in Europe on Volkswagen’s MEB electric platform.

“The raw material bottleneck is mining capacity – that’s why we need to invest in mines directly,” he said.

The automaker has been involved in supply deals with mining companies in Canada, where it will build North America’s first battery plant.

Such partnerships securing financing could cut years off mine development times for small miners, said John Mayer, chief analyst at boutique investment bank SB Angel.

Shamoul declined to comment on more locations under consideration or when Volkswagen might invest directly in the mines until the market has settled further.

“In the future, there will be a select number of battery standards. With our large turnover and third-party sales, we want to be one of those standards,” he said.

An ambitious roadmap
Buying batteries at an affordable cost is a challenge for automakers such as Volkswagen, Tesla (TSLA.O) and Stellantis (STLAM.MI) that are looking to make electric cars more affordable.

A Reuters analysis showed that only Tesla has pledged more investment in battery production than Volkswagen – even though the US electric car maker has struggled to ramp up production and is recruiting Asian suppliers to help.

Few automakers disclosed their direct stakes in the mines, but many struck deals with producers to source lithium, nickel and cobalt and transfer them to battery suppliers.

Securing these resources at the right time, near refineries and from places outside China is key to winning the battery race, said Geordie Wilkes of the UCL Institute for Sustainable Resources.

PowerCo, which was founded last year, is targeting annual sales of more than 20 billion euros ($21.22 billion) by 2030.

It’s an ambitious roadmap for a unit yet to be mass-produced. Production will begin in 2025 at the PowerCo plant in Salzgitter, Germany, 2026 in Valencia, Spain, and 2027 in Ontario, Canada.

Still, Schmall remains confident the automaker can expand quickly — and it should if it wants to build an affordable electric car, where 40% of costs come from the battery.

On Thursday, Volkswagen released details of a €25,000 electric car that it aims to be sold in Europe from 2025.

China’s BYD, which also produces batteries, is far ahead of Volkswagen in the affordable electric car race and outsold the German automaker for the second time in four months in China in February.

Half the employees at VW’s PowerCo are industry veterans from Asia, where global cell production is dominated by producers such as CATL, LG Chem and Samsung SDI.

Reduce costs
In Volkswagen’s five-year €180 billion spending plan, up to €15 billion is earmarked for the three announced battery plants and some sources of raw materials.

So far, Schmoll said in the interview, the automaker has set supplies of raw materials through 2026 and will decide in the next few months how to meet its demand from then on.

It also ordered about $14 billion worth of batteries from the Swedish Northvolt plant.

“It’s more of a challenge to keep battery costs down,” Schmoll said. “We use all the tools with PowerCo.”


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