Volkswagen plans to invest in mines to bring down the cost of battery cells, meet half of its own demand and sell to third-party customers, the carmaker’s board member in charge of technology said.
Its strategy aligns with a wider trend of carmakers seeking greater control over parts of the supply chain traditionally left to third parties, from energy generation to raw material sourcing, as they compete for scarce resources they urgently need to meet electrification targets.
Europe’s biggest carmaker wants its battery unit PowerCo to become a global battery supplier, as well as meet half its own demand with plants mostly in Europe and North America, Thomas Schmall told Reuters in an interview.
PowerCo will start by delivering cells to Ford (F.N) for the 1.2 million vehicles the US carmaker is building in Europe on Volkswagen’s electric MEB platform, he said.
“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” he said.
The carmaker was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant.
Such partnerships guaranteeing finance can cut years off mine development times for junior miners, John Meyer, senior analyst at boutique investment bank SP Angel, said.
Schmall declined to comment on further locations under consideration or when Volkswagen might invest directly in mines until the market was more settled.
“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” he said.
Acquiring batteries at a reasonable cost is a challenge for carmakers like Volkswagen, Tesla and Stellantis looking to make electric vehicles (EVs) affordable.
Only Tesla has pledged more investment into battery production than Volkswagen, a Reuters analysis showed – though even the US EV maker is struggling to ramp up production and is recruiting Asian suppliers to help.
Few carmakers have disclosed direct stakes in mines, but many have struck deals with producers to source lithium, nickel and cobalt and pass them onto their battery suppliers.
Securing those resources in time, close to refineries and from places outside of China is key to winning the battery race, Geordie Wilkes of the UCL Insitute for Sustainable Resources said.
PowerCo, set up last year, is targeting over 20 billion euros ($21.22 billion) in annual sales by 2030.
It is an ambitious roadmap for a unit not yet producing at scale. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain, and 2027 in Ontario, Canada.
Still, Schmall is confident the carmaker can expand quickly – and must do so if it wants to build an affordable EV, in which 40% of the costs come from the battery.
Volkswagen released on Thursday the details of a 25,000-euro EV it aims to sell in Europe from 2025.
China’s BYD, which also produces batteries, is far ahead of Volkswagen in the affordable EV race and outsold the German carmaker for the second time in four months in China in February.
Half the staff at Volkswagen’s PowerCo are industry veterans from Asia, where producers like CATL, LG Chem and Samsung SDI dominate global cell production.
In Volkswagen’s 180-billion-euro five year spending plan, up to 15 billion is earmarked for its three announced battery plants and some raw material sourcing.
The carmaker has so far nailed down raw material supply until 2026 and will decide in the next few months how to meet its demand from then on, Schmall said in the interview.
It has also ordered some $14 billion in batteries from Northvolt’s Swedish plant.
“Bringing down battery costs further is a challenge,” Schmall said. “We’re using all the instruments with PowerCo.”