Volkswagen is working with a Belgian tech group to produce battery materials in Europe, the latest in a series of industry-wide agreements to create a circular battery economy that can meet production targets as automakers transition to electric vehicles.
The $3 billion joint venture between PowerCo, the Volkswagen Group’s battery company, and Brussels-based Umicore aims to produce cathode material to power 2.2 million electric vehicles by the end of the decade. The partnership underscores nascent efforts to build sustainable supply chains as automakers prepare to scale EV production amid supply shortages and rising battery material costs.
According to the trade organization Edison Electric Institute, the number of electric vehicles on US roads is expected to increase fifteenfold by 2030 to 26.4 million vehicles. But the COVID-19 pandemic and the war in Ukraine have made raw materials such as cobalt, lithium and nickel scarcer and more expensive, necessitating the need for closed, industrial-scale supply chains to manufacture new batteries from recycled materials.
Volkswagen and other automakers keen to mitigate the impact are pursuing deals to bring more of the battery lifecycle indoors.
“A supplier industry for battery materials does not yet exist on the required scale,” said PowerCo Purchasing Director Jörg Teichmann in a statement.
Activity in the emerging industry begins to boom. General Motors on Friday announced a partnership with a Canadian battery recycler to make new batteries from reclaimed battery materials. Redwood Materials has partnerships with Ford, Toyota, Volvo and Volkswagen to collect and reuse battery components.
The Volkswagen and Umicore joint venture focuses on cathode materials, which account for around half the cost of an EV battery. The partnership will supply the six European battery plants that Volkswagen plans to build by the end of the decade, starting in 2025 with the site in Salzgitter, Germany.
“Immediate and long-term access to extensive capacities is therefore a very clear competitive advantage,” said Thomas Schmall, Group Board Member for Technology at Volkswagen AG and Chairman of the Supervisory Board of PowerCo SE, in a statement.
Volkswagen said the name and manufacturing location for the joint venture, which is still subject to regulatory approval, has not yet been decided. Under the terms of the agreement, both partners share costs, investments, revenues and profits equally.
