Volkswagen, the largest carmaker in Europe, plans to invest in mines in order to bring down the cost of battery cells, meet half of its own demand, and sell to third-party customers, according to the company’s board member in charge of technology. This strategy aligns with a trend among carmakers to seek greater control over parts of the supply chain that have traditionally been left to third parties, from energy generation to raw material sourcing, as they compete for the scarce resources required to meet electrification targets.
Volkswagen’s battery unit, PowerCo, aims to become a global battery supplier and meet half of the carmaker’s own demand through plants mostly in Europe and North America, said Thomas Schmall in an interview with Reuters. PowerCo will start by delivering cells to Ford for the 1.2 million vehicles the US carmaker is building in Europe on Volkswagen’s electric MEB platform.
“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” Schmall said. Volkswagen is partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant. Such partnerships, which guarantee finance, can cut years off mine development times for junior miners, according to John Meyer, senior analyst at boutique investment bank SP Angel.
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, according to Geordie Wilkes of the UCL Institute for Sustainable Resources.
PowerCo, set up last year, is targeting over €20 billion ($21.22 billion) in annual sales by 2030. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain, and 2027 in Ontario, Canada.
Volkswagen has allocated up to €15 billion for its three announced battery plants and some raw material sourcing in its €180 billion five-year spending plan. It has so far secured raw material supply until 2026 and will decide in the next few months how to meet its demand from then on, according to Schmall. It has also ordered around $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.”
