Volkswagen is partnering with a Belgian technology group to produce battery materials in Europe, the latest in a spate of industrywide deals to create a circular battery economy that can meet production targets as automakers shift toward EVs.
The $3 billion joint venture between Volkswagen Group’s battery business PowerCo and Brussels-based Umicore aims to produce cathode material to power 2.2 million EVs by the end of the decade. The partnership underscores a fledgling effort to establish sustainable supply chains as automakers prepare to scale EV production amid supply shortages and rising costs for battery materials.
The number of EVs on U.S. roadways is expected to increase fifteenfold by 2030, to 26.4 million vehicles, according to utility trade organization Edison Electric Institute. But the COVID-19 pandemic and war in Ukraine have made raw materials such as cobalt, lithium and nickel scarcer and more expensive, prompting the need for closed-loop, industrial-scale supply chains that produce new batteries from recycled materials.
Volkswagen and other automakers anxious to mitigate the fallout are pursuing deals to bring more of the battery lifecycle in house.
“A supplier industry for battery materials on the scale required does not yet exist today,” PowerCo Chief Procurement Officer Jörg Teichmann said in a statement.
Activity in the nascent industry is starting to boom. General Motors announced Friday a partnership with a Canadian battery recycler to produce new batteries from recovered battery materials. Redwood Materials has partnerships with Ford, Toyota, Volvo and Volkswagen to collect and repurpose battery components.
The joint venture between Volkswagen and Umicore focuses on cathode materials, which account for roughly half the cost of an EV battery. The partnership will supply the six European battery plants Volkswagen plans to build by the end of the decade, starting in 2025 with its Salzgitter, Germany site.
“Immediate and long-term access to extensive capacity is thus a very clear competitive advantage,” Thomas Schmall, group board member for technology at Volkswagen AG and chairman of the supervisory board of PowerCo SE, said in a statement.
Volkswagen said the name and production site for the joint venture, which remains subject to regulatory approval, have not yet been decided. Under the terms of the agreement, both partners will equally share costs, investments, revenues and profits.