Volkswagen forms a new battery production network for electric vehicles

Volkswagen, together with China's Gotion High-tech, is expanding cooperation in battery production for electric vehicles. The partners plan to create three joint ventures in Spain, Slovakia, and Morocco with total investments of about €3.22 billion.

The creation of the joint ventures was officially announced by Volkswagen Group. They will cover the production of battery cells based on lithium iron phosphate (LFP) technology, as well as cathode materials.

The largest project will be in Valencia. The PowerCo plant is planned to be transferred to a joint venture in which Volkswagen's battery division will retain 51%. According to Gotion, the site should provide about 29.1 GWh of annual capacity. In Slovakia, the partners plan production of another about 8.4 GWh of batteries per year, with Gotion holding a controlling stake in this project.

The third enterprise will be located in Kenitra, Morocco. There, production of up to 100,000 tons of cathode materials for LFP batteries is planned annually. They are intended to supply raw materials to the partners' European plants. 

According to the South China Morning Post citing Gotion's stock exchange announcement, the total cost of the three projects is estimated at approximately €3.22 billion. Gotion plans to invest about €1.6 billion, and PowerCo about €1.62 billion. Investments will be made in stages.

However, the investment structure includes not only new capital. Volkswagen notes that PowerCo is to contribute about €470 million to obtain 49% in the projects in Slovakia and Morocco, while Gotion plans to invest approximately €1.1 billion for 49% of the enterprise in Valencia. The agreements still require approval by shareholders and regulators.

Volkswagen explains the expansion of the partnership by the rapid growth in demand for cheaper LFP batteries. According to the group's estimates, their share in the European market could grow from about 10% now to 40-60% by 2030. At the same time, there are currently no significant own production capacities for LFP batteries in Europe.

In parallel, Volkswagen plans to sell 5.3% of Gotion shares, but will retain the status of a strategic investor in the Chinese battery manufacturer and representation on its board of directors.

Based on materials from: Volkswagen Group, South China Morning Post