Volkswagen’s huge EV bet will require the output of four Tesla Gigafactories
Last week, the German government announced a $1.71 billion investment to support its own lithium-ion battery industry, as it looks to catch up with EV and battery cell front-runner China.
Germany is a car-making behemoth, employing about 820,200 people and generating revenues of $665 billion in 2017.
Now, it’s finally making a belated move to protect this industry amidst the disruptive shift away from combustion engines to electric vehicles (EVs).
China is charging ahead in this respect. Just last week, automotive parts giant Wanxiang Group announced plans to spend $13.6 billion on a massive 80GWh EV battery gigafactory (for comparison, Tesla’s Gigafactory 1 reached reached an annualised rate of 20GWh in mid-2018).
The German government wants Europe to supply 30 per cent of global battery cell production by 2030 to reduce dependence on Asian EV battery suppliers, according to Reuters.
German Economy Minister Peter Altmaie says he wants to make the first battery manufacturing investment decisions at the end of the first quarter of 2019, ahead of first production from 2021.
This – and rapid EV ramp-up by German car makers such as Daimler and Volkswagen – are expected to have a real impact on demand for key battery metals such as lithium, cobalt, manganese, graphite and nickel.
“By the end of 2023 we want to invest almost €44bn in the future topics of #electromobility, #autonomousdriving, #mobilityservices and #digitalization" – #Volkswagen CEO Diess, following the supervisory board meeting. pic.twitter.com/5iZU4E8d0Z
— Volkswagen Group (@VWGroup) November 16, 2018
Volkswagen Group — which owns Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, Škoda and Volkswagen — is going to spend more than $68.5 billion in the coming five years to the end of 2023 on EVs, autonomous driving, new mobility services and digitalisation.
The world-leading Volkswagen Group made revenues of almost $360 billion selling 10.7 million cars in 2017, so this is clearly a watershed moment for the entire battery supply chain.
Volkswagen sees an EV future as inevitable, and wants to “speed up the pace of innovation” from a position of strength.
Overall, it wants to produce 1 million electric cars per year globally from 2025.
It will start with the Zwickau vehicle plant, which will have production capacity of 330,000 EVs per year.
After that, Volkswagen intends to transform its other German plants, and build new ones in China and the US.
“The transformation poses enormous challenges for our workforce and the whole automotive sector. Here at Volkswagen, we are shaping this change from a position of strength and thus sending a clear message to the entire industry,” Volkswagen chairman Bernd Osterloh said.
“Because our long-term market survival hinges on stunning vehicles, services and research activities. The transition to e-mobility is no longer wishful thinking, it starts right here.”
To accomplish this, Volkswagen reckons it needs battery capacity in excess of 150GWh per year through to 2025 just to equip its own electric fleet.
That’s equal to the annual battery cell capacity of more than four Tesla Gigafactories.
For now it is partnering with Asian battery makers LG Chem, Samsung, SKI (Korea), and CATL (China) to lock in its battery supply from 2019. Volkswagen has now reportedly booked enough battery capacity to build up to 50 million EVs.
Separately, German carmaker Daimler says it is “putting intensive work” into expanding its battery production network.
Its subsidiary and lithium-ion battery maker Accumotive will double employee count to 1000 by the end of 2018 – one year ahead of schedule.
A second $780 million battery factory is also being built at the Accumotive site, Daimler said, which will be “one of the largest and most modern battery factories worldwide”.
Overall, Daimler is investing more than $1.56 billion on a global battery production network — eight factories, at six locations, on three continents. This includes Germany, China, Thailand and the US.