Volkswagen Group, under the leadership of CEO Herbert Diess, is pushing forward aggressively into the electric car future. It has committed to an investment of $20 billion between now and 2030 to create a new company called PowerCo that will be responsible for the automaker’s global battery business. This week, it broke ground on the first of 6 new European battery factories, which will be located in Salzgitter.
According to TechCrunch, PowerCo will manage Volkswagen Group’s international factory operations, develop cell technology, vertically integrate the value chain, supply the factories with machinery and equipment, and manage battery recycling operations. The Salzgitter plant is expected to supply about 500,000 EVs. Together, the new factories planned for Europe could employ 20,000 workers and supply enough batteries to power 3 million electric cars. Volkswagen expects the 6 factories will cut the cost of batteries for its cars in half compared to today’s prices.
In a press release, Diess called the launch of PowerCo a “strategic milestone. Establishing our own cell factory is a mega-project in technical and economic terms. It shows that we are bringing the leading-edge technology of the future to Germany.”
The 6 battery factories and the new company are part of Volkswagen’s efforts to ramp up EV production worldwide. Earlier this week. The world’s second-largest automaker announced plans to grow its business in China with “some major investments” and a hiring spree at the Chinese office for CARIAD, its in-house automotive software arm.
Battery Production To Begin In 2025
Volkswagen said battery cell production will begin in 2025 at the Salzgitter factory, which will serve as the standardized model for future factories, making it easier to replicate and scale. PowerCo will locate its second cell factory in Valencia, Spain, and is considering expanding the model to North America. Locations for the 4 other European factories have not been announced. Building batteries for grid scale energy storage is also under consideration. PowerCo will be managed by CEO Frank Blome.
Thomas Schmall, Volkswagen board member for technology, says, “In building our first in-house cell factory, we are consistently implementing our technology road map. PowerCo will become a global battery player. The company’s major strength will be vertical integration from raw materials and the cell right through to recycling. In the future, we will handle all the relevant activities in-house and will gain a strategic competitive advantage in the race to take the lead in e-mobility. We have secured a top team for this great undertaking.”
Daniela Cavallo, chair of the general and group works council of Volkswagen AG, was a thorn in Diess’ side last year after he said that producing electric cars might result in up to 30,000 fewer job opportunities, but now she is all smiles. “Today is a day to celebrate. At the heart of Europe, we are creating a new future-oriented segment and up to 20,000 future-proof jobs, including 5,000 in Salzgitter alone, at the home of VW.
“Our heartfelt commitment and responsibility for the transformation of our proud engine plant and the exemplary retention of secure jobs for its employees continues. This principle remains one of our guiderails, just as it has been in the future-oriented area of the battery from a very early stage, is firmly anchored in the Pact for the future and has been robustly defended for many years. As a result of these efforts, we now have a showcase for ecological and social transformation.”
A Blueprint For Future Volkswagen Factories
Salzgitter will serve as a blueprint for cell factories throughout Europe and will set new standards in terms of sustainability and innovation. “What we have put to the test millions of times over with vehicle platforms such as the MQB and MEB will also lay the foundation for establishing cell production: we will be standardizing on the basis of European standards and upscaling. This way, we will combine speed and cost optimization with the highest quality levels”, says Frank Blome.
Standardization will not only cover equipment, buildings and infrastructure but also products, processes and IT. This way, factories that can rapidly be converted for further product and production innovations will be created. Each factory will be operated 100% on electricity from regenerative sources and will be designed for the future closed-loop recycling.
This announcement proves Volkswagen is fully committed to the EV revolution and is serious about exercising close control over its battery supply going forward. We know a battery factory (or two) is under active consideration for North America. We also know that the company has been experiencing slow sales in the US and China. But none of that is preventing the company from moving aggressively forward with the EV revolution and that is very good news for electric car advocates.