Full electric press continues for Volkswagen

More details of VW’s EV-battery ambitions emerged this week with the company starting work on its own gigafactory in Germany – the first of up to half a dozen similar plants across the globe.

VW broke ground on a new cell factory in Salzgitter, Germany, as it launched a company called PowerCo which will house all of the car giant’s future battery operations around the world.

In a statement, VW said PowerCo would be “responsible for global battery activities of the Volkswagen Group.”

The car giant said between now and 2030, PowerCo would “invest more than €20 billion [$US20.4 billion] together with a number of partners.

PowerCo is looking to generate annual sales in excess of €20 billion and employ up to 20,000 people in Europe alone, according to VW.

By the year 2030, VW wants at least 70% of its European revenue to come from electric cars. In China and North America, its goal is at least 50% of revenue from EVs by the end of this decade.

VW’s electrification plans put it in direct competition with the ambitions of fellow ICE rivals GM, Ford, Stellantis, BMW and the Nissan/Renault/Mitsubishi trio, as well as Tesla and BYD in China.

In total these companies will be spending hundreds of billions of dollars on their own transitioning, as well as supporting the move to renewables in the wider economy and everyday life.

The Salzgitter plant at the moment makes engine variants for more than 40 models in the Volkswagen Group as well as important e-components for electric vehicles.

In the future, it is planned that the Salzgitter plant will become the battery centre for the Volkswagen Group and will employ up to 5,000 with cell production starting in 2025.

The plant will eventually reach 40GWh annual production capacity, enough for around half a million electric vehicles per year.

PowerCo will run not only the Salzgitter factory but will also take care of research and development.

After Salzgitter, VW plans another plant in Valencia, Spain, and sites are being looked at for the remaining plants, including the possibility of plants in North America. Each plant will produce 40GWh of batteries per year for a total of 240GWh.

The plants will run on 100% renewable electricity. VW says each plant will be designed to have future closed-loop recycling systems on-site, allowing for the capture of up to 90% of raw materials from battery packs at end of life.

VW is developing a unified prismatic cell to use across its model line. The plan is to drop battery costs by about 50% from today, down to “significantly below” $100/kWh.

That’s the future but for the now VW says its chocka and battery supply remains constrained.

The company says all 2022 EV “is essentially sold out, meaning that most buyers will have to wait until next year to get one.”

“EV demand is incredibly high right now and supply has not ramped in tune with demand, alongside supply disruptions across the world due to the ongoing COVID-19 pandemic.”

“The recent global rise in petrol prices has added demand from consumers for electric vehicles.

VW says that while many other car companies and start-ups are investing heavily in battery cell production, all of these battery factories will take some time to come online.

“So relief for EV supply constraints is probably going to take some time to come online and EV production and sales look like being constrained for some time to come by availability of the core element – batteries and battery metals and components.

And that’s how it usually is in revolutions of this kind – availability and development processes usually can’t meet the rapid rise in demand for a new product from early adopters – the iPhone is a perfect example as are solar panels.

Product prices remain high because of constrained supplies not meeting demand, premia appear in the original and grey markets – some companies capture those premia, others miss out but the high prices do help finance the expansion of the product or process and that gradual expansion sees prices steady then weaken as greater efficiency, component changes/innovations and new breakthroughs lower costs along the chain and for consumers.

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Despite Tesla’s problems in Shanghai and worries about labour force relations at its new Berlin factory, the electric vehicle giant has no trouble in attracting partners.

Not even the imbroglio Tesla co-founder, Elon Musk finds himself in with his silly attempt to buy Twitter for $US44 billion seems to worry partners, actual and potential.

Japan’s Panasonic is a long-time partner with a jointly owned massive battery plant in Nevada.

Now the Japanese giant and Tesla plan a new battery plant in Kansas. The cost to Panasonic? Around $US4 billion and a leading position to meet future demand from Tesla’s two existing car plants in America (California and Texas).

The Japanese group is the world’s third-largest producer of EV batteries behind CATL, the Chinese market leader and LG Energy Solution of South Korea (which has had an unfortunate experience supplying dud batteries to GM for the first version of its small Volt EV. That saw LG pay GM $US1.9 billion late in 2021).

The Nevada Gigafactory cost $US5 billion and is jointly operated with Tesla.

While Panasonic said no decision had been made on the research component of the Kansas plant, the Japanese company and government are being pressured by the US to expand into R&D in Kansas.

Panasonic meantime is facing pressures as it loses its exclusive relationship with Tesla which developing its own batteries and entered partnerships with LG Energy Solution and CATL to support expanding sales of its vehicles.

Panasonic is doing something similar in finding other customers for its batteries, such as Toyota which is a reluctant co vert to pure EV technology because it has invested so much in hybrids.

Panasonic Energy, the Japanese conglomerate’s battery unit, said on Thursday that it had won approval to receive incentives from Kansas to build the plant.

“With the increased electrification of the automotive market, expanding battery production in the US is critical to help meet demand,” Kazuo Tadanobu, CEO of Panasonic Energy, said in a statement at the announcement of the plant.

Tadanobu told investors in June that the company planned to triple or quadruple EV battery production capacity by 2028, boosting its output mainly in North America.

Panasonic Energy, which has production facilities in the US and Japan, currently has the capacity to produce almost 50 gigawatt hours per year.

Panasonic is developing the next-generation EV battery called 4680 and plans to mass produce the new batteries from next year. The new battery is claimed to have five times more energy capacity than current devices.

Some battery analysts say large capacity batteries are not the future, that the future lies in smaller batteries with more compact but high energy capacity and quick recharge facilities, capable of providing the ability to run around urban areas.