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Volkswagen Increases EV Battery Contracts to $48 Billion

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【Summary】During the company’s Annual General Meeting 2018 earlier this month, the business, which owns Audi, Bentley, Skoda and Lamborghini, reiterated its EV ambitions, revealing a massive increase in battery-purchasing contracts.

Michael Cheng    May 11, 2018 3:51 PM PT
Volkswagen Increases EV Battery Contracts to $48 Billion

Volkswagen's plan to dominate the EV sector is steadily taking shape. During the company's Annual General Meeting 2018 earlier this month, the business, which owns Audi, Bentley, Skoda and Lamborghini, reiterated its ambitions, revealing a massive increase in EV battery contracts.

The automaker doubled its contracts to the amount of $48 billion. By comparison, the value of the awarded battery-purchasing contracts is the same as Tesla's current market cap.

Securing agreements with battery manufacturers is a crucial aspect of Volkswagen's EV strategy, as the company will not be producing the components on its own. Reliance will hinge on the capabilities of battery suppliers working with the automotive juggernaut.

Blazing Through Roadmap E 

In March, ex-CEO Matthias Müller announced a $25 billion investment in battery cell contracts. Now at $48 billion, the automaker is close to reaching its goal of $50 billion contracts, which will cover its EV production requirements up to 2025.

With the new battery contracts, Volkswagen is ready to blaze through Roadmap E – the company's initiative to bring EVs to the automotive sector. Under the plan, the company is set to electrify its entire fleet. At the moment, consumers are eagerly waiting for the release of the production-ready model of the ID hatchback concept, which will make its way to showrooms by 2020. The modern car is expected to come with an average range of 300+ miles per charge.

"Over the last few months, we have pulled out all the stops to implement ‘Roadmap E' with the necessary speed and determination," said Müller.

"To ensure adequate battery capacity for the massive expansion of environmentally-friendly electric mobility, partnerships with battery manufacturers for Europe and China have already been agreed."

Newly appointed Volkswagen CEO Herbert Diess announced a target of selling three million EVs per year by 2025. According to Bloomberg, this equates to one out of four cars sold by the car manufacturer to be electrified.

"By 2020 we will offer our customers more than 25 new electric models and more than 20 plug-in hybrids," explained Diess. "In just a few years' time, then, across all brands and regions, we aim to put the world's largest fleet of electric vehicles on the road."

EV Battery-purchasing Contracts

Although Volkswagen failed to reveal the parties it awarded with battery contracts, some speculations have been made and released, based on previous collaborations. Groups that are likely to have been awarded with battery partnerships include the following: Samsung SDI, Panasonic, CATL and LG Chem. All of the companies mentioned are active in the automotive space and have ongoing partnerships with other car manufacturers.

Lastly, during the company's annual meeting, current CEO DIess mentioned the need to establish production plants for power cells and battery components in Europe, due to increasing demand. This suggests that Volkswagen may not be finished awarding battery-purchasing contracts – even after meeting its $50 billion goal.

High startup and investment demands are preventing automakers and other businesses in the industry from establishing battery production plants. Such challenges were highlighted by Robert Bosch, the world's largest manufacturer of auto components.

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