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Volkswagen Breaks Ground on the First of Six European Battery Cell Factories as Part of a $20 Billion Investment

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【Summary】Volkswagen is bundling its global EV battery business into a newly formed company named PowerCo as past of a $20 billion investment. The new company will be tasked with managing the entire value chain of the automaker's battery business, including sourcing raw materials and battery recycling. On Thursday, Volkswagen and PowerCo held a groundbreaking ceremony for the first of six new EV battery plants planned for Europe.

FutureCar Staff    Jul 07, 2022 12:45 PM PT
Volkswagen Breaks Ground on the First of Six European Battery Cell Factories as Part of a $20 Billion Investment
A computer image of the new PowerCo EV battery factory in Salzgitter, Germany.

Automaker Volkswagen is investing billions to transition to becoming an electric automaker. Part of the massive investment includes electric vehicle battery cell production to lessen the automaker's reliance on Asian battery suppliers. 

As part of the plans, Volkswagen is bundling its EV battery business into a newly formed company named PowerCo. The company will be tasked with managing the entire value chain of VW's future EV battery business, including sourcing raw materials and battery recycling.  

On Thursday, Volkswagen and PowerCo broke ground in Germany on the first of six battery plants planned for Europe. The first PowerCo battery factory in Salzgitter will serve as a blueprint for the others. 

Through 2030, PowerCo will invest more than $20 billion together with partners to scale battery production across the six European factories.

In future, the Salzgitter plant will eventually reach an annual capacity of 40 GWh, enough for about 500,000 electric vehicles. By 2030, Volkswagen aims to operate six PowerCo battery factories with a total volume of 240 GWh throughout Europe. That's enough to supply roughly 3 million VW vehicles each year. 

Volkswagen said battery cell production will start in 2025 at the new Salzgitter factory.

"Today is a good day for the automotive industry in Germany and Europe," said German Chancellor Olaf Scholz. "Volkswagen is showing how the future of sustainable, climate-compatible mobility could look. Together, we are laying the foundation for shaping this future to a significant extent in Salzgitter."

Volkswagen is also scaling its battery production in a standardized way. This standardization of batteries will cover equipment, buildings and infrastructure but also products, processes and IT. 

Each PowerCo factory will be operated 100 percent on electricity from regenerative sources and will be designed for future closed-loop recycling. PowerCo is committed to producing cells using green electricity with a recycling rate of more than 90%.  

"What we have proven a million times over with Volkswagen vehicle platforms, standardizing and scaling up allows for speed and cost optimization with the highest quality," said PowerCo Chief Executive Frank Blome.

Volkswagen unveiled a new prismatic unified battery cell at its Power Day event in 2021. This standard cell design will eventually be used in up to 80 percent of all VW models. These unified cells will be produced in Salzgitter from 2025 onwards. 

Prismatic battery cells are not cylindrical like the ones used by Tesla, Lucid Group and other automakers. The cells are housed in a rigid housing that is rectangular in shape like building blocks. The design makes the most use of space inside the battery pack compared to traditional cylindrical cells.

VW says having a unified battery cell design will also reduce costs by up to 50 percent. The automaker said that prototypes already produced to date have demonstrated high performance to deliver longer ranges, fast charging times, as well as a high level of safety.

"In building our first in-house cell factory, we are consistently implementing our technology roadmap," said Thomas Schmall, Member of the Board of Management of Volkswagen AG responsible for Technology and Supervisory Board Chairman of PowerCo. "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." 

The second PowerCo battery plant is planned for Valencia, Spain. The four other locations in Europe have not been announced yet. 

In addition to the six European factories, VW is planning to build additional PowerCo factories in North America to supply cells for its U.S.-built EVs. 

In May, Volkswagen CEO Herbert Deiss said he believes that company can overtake Tesla and become the world's biggest producer of EVs by 2025.


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