Volkswagen announces $20 billion effort to build its own EV batteries

Volkswagen said it would invest $20.38 billion to build electric vehicle batteries, a move the company says will create 20,000 jobs and generate $20.38 billion in annual sales. The automaker will create a new company called Power Co to oversee the vast effort as VW races to secure enough capacity, materials, and supplies to power its EV ambitions.

Power Co will manage VW’s entire battery supply chain, from research and development of new technologies to the mining of the raw materials to end-of-life recycling. The news was announced at a groundbreaking ceremony for the company’s first battery plant in Salzgitter, a city in Germany’s Lower Saxony.

“The battery cell business is one of the cornerstones of our New Auto strategy which will make Volkswagen a leading provider of the sustainable, software-driven mobility of tomorrow,” VW CEO Herbert Diess said in a statement. “Establishing our own cell factory is a megaproject in technical and economic terms. It shows that we are bringing the leading-edge technology of the future to Germany!”

Last year, VW unveiled plans to build six battery cell production plants in Europe by 2030, including the facility in Salzgitter and one in Skelleftea, Sweden. A third plant will be established in Valencia, Spain, and the fourth factory will be based in Eastern Europe. The company is also exploring plans to build future gigafactories in North America. The plants will eventually have a production capacity of 240 gigawatt-hours a year.

Image: VW

Starting in 2023, VW plans to roll out a new unified prismatic cell design of its batteries that will be installed across the automaker’s brands. The goal is to have this unified cell design powering up to 80 percent of VW’s electric vehicles by 2030. VW also has contracts with two other major battery producers, Samsung and CATL. And the company is backing a startup based in San Jose, California, QuantumScape, which is working on more energy-efficient solid-state batteries.

VW isn’t the only automaker to see vertical integration as a key component to EV success. Ford is building three new battery plants that it says will have 129 GWh a year of production capacity. General Motors is planning four new battery factories in the US with LG Chem for a total annual capacity of 140 GWh. Stellantis is building a $2.5 billion battery plant in Indiana, and Hyundai and Toyota have also announced cell production plans in the US.

VW, which is the second-largest automaker in the world based on volume, has run into headwinds in its shift to electric vehicles. Diess recently said that the company was “basically sold out on electric vehicles in Europe and in the United States for the year,” which means that anyone hoping to get an EV from VW, Audi, or any of the group’s other brands may have to wait until 2023, as the company tries to navigate the chip shortage and production issues from COVID shutdowns in China.