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Business Maverick

Volkswagen Breaks Ground on $20 Billion Battery Unit’s First Cell Plant

The Volkswagen AG headquarters and auto plant in Wolfsburg, Germany, on Wednesday, March 9, 2022. VW's Chief Executive Officer Herbert Diess is warning that the fallout of a lengthy war between Ukraine and Russia risks being "very much worse" for Europe's economy than the impact caused by the Covid-19 pandemic. Photographer: Krisztian Bocsi/Bloomberg
By Bloomberg
07 Jul 2022 0

Volkswagen AG broke ground on a new battery plant in Germany on Thursday, saying the factory marks the first step in an effort that will generate more than 20 billion euros ($20.4 billion) in annual revenue by the end of the decade.

The Salzgitter venture is one of six battery plants VW has planned for Europe. PowerCo, the unit formed to oversee the carmaker’s global battery business, is expected to invest more than 20 billion euros in five of the factories by 2030, creating roughly 20,000 jobs in Europe, according to a statement.

Automakers from VW to General Motors Co. are exploring different business models as they race to electrify their lineups and catch Tesla Inc., the world’s top seller of electric vehicles. They’re forging partnerships with battery cell makers and mining companies as they try to secure materials and know-how.

Read more: Volkswagen Is Looking at Making Own Batteries in North America

Salzgitter is home to VW’s main motor factory, and last year the carmaker opened an $80 million facility there to research, develop and test EV batteries. Roughly 2 billion euros will be invested in the cell factory by 2026, where production is scheduled to begin in 2025. At full capacity, the plant will be able to produce 40 gigawatt-hours of cells per year, enough for roughly 500,000 EVs, according to the company.

“We hired very seasoned and experienced executives from the battery business,” Chief Executive Officer Herbert Diess said in an interview with Bloomberg Television. “We’re really gearing up to become one of the bigger battery-cell producers.”

VW plans to set up a cell plant in Valencia, Spain, may build another facility in eastern Europe close to its assembly plants, and is scouting for potential sites in the US, the CEO said. VW is open to inviting in more partners to aid the battery push, he added.

PowerCo will be overseen by the VW executives that have been leading the carmaker’s battery efforts: Frank Blome, head of VW’s battery cell and systems, will be the unit’s CEO, while former Apple Inc. executive Soonho Ahn will serve as chief technical officer. The PowerCo team in Salzgitter will oversee activities including procurement, raw-materials processing, battery development and management of the planned plants.

IPO Prospects

VW has indicated it’s open to selling shares in the new business after a period of financing it internally and inviting in strategic partners. Chief Financial Officer Arno Antlitz said last month the unit has been set up in a way to facilitate a potential listing next year or in 2024.

VW’s battery push isn’t without challenges. In the shift to electric cars, manufacturers are facing a complete overhaul of their supply chains with soaring prices for raw materials that threaten to undermine returns.

“Some look with concern at the sheer magnitude of the task that lies ahead of them: can it all end well — for me, for my family, for my region?” German Chancellor Olaf Scholz said during the event in Salzgitter. “That’s why I want to tell you: Yes, it can end well and it will end well, under one condition: that we don’t dwell on the past, but rather take the bull by its horns and aggressively accept the challenge of the new.”


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