Electromobility: Volkswagen is looking for investors for its battery cell business
Wolfsburg The goal is clear: The new Volkswagen subsidiary PowerCo is to become the most important European manufacturer of battery cells in a few years. By 2030, six so-called “gigafactories” are to be built on the continent, which will be sufficient for up to five million electric cars, investment requirement: 20 billion euros. The current 350 employees are expected to increase to 20,000 by the end of the decade. A later partial IPO is also being discussed.
At the same time, PowerCo is on the lookout for further settlement areas in North America, where Volkswagen is also considering its own cell plants. “The focus is now on Europe, the USA is an option,” says Kai Müller, CFO of the new VW subsidiary, in an interview with the Handelsblatt.
In the longer term, Volkswagen does not want to finance the development of cell production alone. “Financial investors could be added from next year,” adds Volkswagen CFO Arno Antlitz. There are already initial inquiries from potential investors.
“Start-ups usually have neither money nor a marketable product nor customers. This is different with the PowerCo. We have the major customer Volkswagen. We have a working technology and start-up financing. The interest of third parties in investing in us is correspondingly high,” adds Kai Müller.
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In a further step, the battery subsidiary of the VW Group could at least partially be listed on the stock exchange. However, this is a consideration for the future, which will be realized in 2024 at the earliest or even later. First of all, the new company must be further developed. In 2030, the Volkswagen Group wants to cover 50 percent of its global sales with electric cars, and a share of 70 percent is planned in Europe.
Because the new PowerCo – the initially internal working title for the VW subsidiary is now the official name – was set up directly as a European stock corporation (“SE”), an IPO would be comparatively easy – there is already a board of directors and a supervisory board. A subsequent legal reorganization would also be omitted in the event of a possible IPO.
A step that was taken consciously, as VW CFO Antlitz emphasizes. “We want an independent, competitive and in principle also capital market-capable company.”
Later, Volkswagen could also list other subsidiaries that have a similar cross-sectional function for the entire group as the new PowerCo. Comparable to the new battery subsidiary are VW Financial Services (VWFS), which is responsible for setting up a mobility platform. All of the group’s software activities are combined in Cariad SE.
The VW Group is confident that the new battery subsidiary, which was spun off on July 1, will soon be able to keep up with the established cell manufacturers from Asia. “We can scale. This will help us with our ambitious ramp-up and give us significant advantages,” says CFO Antlitz. In order to further expand the technical expertise, the PowerCo will continue to hire chemists and other battery experts.
Volkswagen PowerCo: In-house battery production should reduce dependencies
In contrast to most other car manufacturers, Volkswagen has decided to set up a completely independent battery production. This should prevent excessive dependence on the large cell manufacturers from China, South Korea and Japan. By 2025, the car company will only purchase cells from Asian suppliers, after which in-house production will begin. Last week, the cornerstone was laid for VW’s first cell factory in Salzgitter, Lower Saxony.
The new VW subsidiary will move into its headquarters right next to the planned cell factory in Salzgitter. 2,500 people will later work in the PowerCo headquarters. With all the gigafactories, Volkswagen’s battery subsidiary is expected to have annual sales of 20 billion euros. If the PowerCo factories produce enough battery cells for the brands of the VW Group in a few years, production could later be expanded for other car manufacturers.
This strategy has met with approval in investor circles. “In view of the structural scarcity in the battery market and the geopolitical uncertainties, own gigafactories are a crucial prerequisite for being able to play a leading global role in electric cars,” says Patrick Hummel, automotive analyst at UBS in Switzerland.
With the six planned cell plants, initially only the passenger car production of the VW Group can be served. But the trucks of the truck subsidiaries MAN and Scania are also supposed to be increasingly electric after 2030 – and therefore need battery cells.
“Discussions are ongoing,” explains PowerCo board member Müller. In any case, car and truck cells should have the same format. The need for trucks can therefore also be served by expanding the six gigafactories now planned.
The PowerCo wants to introduce a unit cell in its cell plants, with which around 80 percent of the entire group requirement can be covered. “This makes for less complexity than most of the competition,” says VW CFO Antlitz. For some of their particularly sporty models, the subsidiaries Audi and Porsche in particular will use batteries that are not covered by the standard from Salzgitter.
>> Read here, why lithium is particularly scarce in cell supply
The unit cell means the external format. The inner workings – the chemistry – can still be decisively changed. For example, the electric entry-level models planned for 2025 are to have battery cells based on iron phosphate (“LFP”). They are cheaper than the usual cobalt batteries, making entry-level prices for electric cars of less than 25,000 euros possible.
Another task of the PowerCo will be securing its own raw materials. “There is a real run on the raw materials,” says PowerCo CFO Müller. Here, too, close talks are underway. Müller: “Because our sales are already secured today, we have a strong negotiating position.” First and foremost are lithium and cobalt and nickel asked.
Even before the PowerCo spin-off, the VW group had concluded supply agreements with raw material producers. As an independent company, the new subsidiary will now take care of this. This securing of the raw material chains is likely to cost additional money. Group board member Antlitz speaks of a “significant amount”.
There is also great demand for the machines that are used in the gigafactories for cell production. So far, Asian providers have also dominated in this field. Volkswagen and Bosch want to stand up to this together. The two large German groups are therefore founding a joint venture that focuses on machines and systems for cell production.
More: Into the future with “Salzgiga” – VW lays the foundation for a model plant for battery production