VW will strengthen its alliances with battery suppliers for electric thrust

LEIPZIG, Germany (Reuters) – Volkswagen (VOWG_p.DE) will create joint ventures and help finance battery production to convince skeptical cell suppliers to support its efforts to mass-produce electric vehicles, said Stefan Sommer, a member of the board of directors, Reuters.

VW announced that it would buy battery cells worth 50 billion euros (56.57 billion dollars) and identified the Swedish Northvolt, the South Korean SKI (096770.KS), LG Chem (051910.KS) and Samsung SDI (006400.KS) as well as CATL (300750.SZ) as strategic partners.

"Not all suppliers are convinced that electric mobility will be so important. You have to spend more time convincing them to invest in the auto industry, "Sommer told Reuters.

Volkswagen said that by 2025 it would need a capacity of 150 gigawatt hours in Europe and another 150 in Asia. In 2030, this figure will double.

"These producers need to prioritize between making a new smartphone and building a new battery factory. Thus, even battery cell producers are asking: will production volumes increase rapidly ?, he said.

The German manufacturer is retooling 16 factories to build electric vehicles and plans to start producing 33 different electric cars under the Skoda, Audi, VW and Seat brands by mid-2023.

Customers have been slow to adopt electric vehicles in large numbers due to the limited operating range, long battery charging times and lack of charging infrastructure. This scared potential suppliers.

"By acting as normal components, suppliers have the opportunity to sell to other automakers if VW buys less." But with electromobility, we all know it: if it does not work for VW, it will not work for others, "he said.

This is why VW finances the tools of its suppliers and shares the risk of creating new production capacities by transforming new plants into a joint venture.

"The trend is to make joint ventures. Suppliers are still wondering if this market will take off or not. In the meantime, they realize that this is an opportunity, "he said.

Joint ventures have the advantage of quickly giving VW a glimpse of the progress of manufacturing during the construction of a new plant.

"We have developed our own expertise, which we share with suppliers, which helps us when we build a new factory. This gives us an early indication of startup problems, "said Sommer.

"We could not build as many cars as we wanted. Our supplier does not provide the numbers we need. "

Starting in 2021, Volkswagen will use electric battery cells using a composition of nickel, manganese and cobalt in a ratio of 8: 1: 1, said Sommer, adding that a supplier was still using a ratio of 6 : 2: 2.

For the Chinese market, Volkswagen sees a potential for using lithium batteries, called LFPs. These have a lower energy density than NMC cells, but Chinese drivers tend to stay in larger cities and do not drive long distances.

"The need for a long operating range is less important in China," said Sommer.

Solid-state battery cells will replace NMC cells and become ready for mass production in the second half of the 2020s, said Sommer.

"Solid state cells can be manufactured in existing battery factories. It will be the same producers and the same factories where batteries are made in the solid state, "said Sommer, adding that about 60% of the tools could be reused for next-generation cells.

Even though Volkswagen can build its own battery cell factories in China, Sommer added, the automaker is relying for the moment on its partners in the Chinese joint venture FAW 00800.SZ, SAIC (600104.SS) and JAC (600418.SS) to find suitable battery suppliers.