Volkswagen Group China on Monday (21/3) said it would form a joint venture with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies. This collaboration is part of efforts to control the cost of producing electric vehicle batteries at a time when raw material prices soar.
The three companies have signed a memorandum of understanding to form two joint ventures. The first joint venture between the three companies is in Indonesia, where they will jointly invest their respective advantages and resources in the production of battery raw materials, Volkswagen said in a statement.
More than 10 percent of the world’s nickel laterite ore reserves are in Indonesia, the German automaker added. Volkswagen plans to set up six major battery factories in Europe and spend billions of euros in a bid to overtake Tesla as the world’s biggest seller of electric vehicles by 2025.
Volkswagen’s second joint venture will be formed with Huayou in China’s southwest Guangxi region for nickel and cobalt sulfate refining, precursor and cathode material production, he said.
Global nickel prices have surged nearly 400% this year because of the Ukraine crisis, given that Russia is a major supplier of the metal. The imposition of sanctions on Russia has further heated up the already smoldering nickel market.
CMNI3 prices on the London Metal Exchange got a further boost on March 8 when they doubled to $100,000 a tonne in a matter of hours, after Tsingshan bought nickel in bulk to reduce its short bets on the metal and its exposure to expensive margin calls.
However, prices have fallen sharply since then, after the LME was forced to stop trading for a period and reopened with new trading limits.
Privately owned Tsingshan has become the world’s top nickel producer thanks to the development of a low-cost process to manufacture the metal.
Volkswagen’s move is seen to secure the supply of raw materials to make electric vehicles. Some electric vehicle manufacturers such as Tesla have raised the prices of their electric vehicles after a high raw material price hike