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Bigger than Giga – VW mulls Tesla-beating battery factory

VW is reportedly considering an US$11 billion battery factory, as it aims to build 1 million electrified vehicles by 2025

Reports in the German press last week suggest that Volkswagen Group is considering major new investments as part of its push to become a leader in electric vehicles. Specifically, this could involve the company building its own US$11 billion battery factory in Germany.

It’s significant in that it would allow VW to move away from the major suppliers which currently dominate the supply chain – e.g. Panasonic (which supplies Tesla) and LG Chem (which supplies General Motors). Presumably the idea is that integrated production will make batteries cheaper and/or afford the company more flexibility in how it designs and produces its EVs.

German newspaper Handelsblatt originally picked up the story, reporting from “company sources” that executives were likely to approve the mooted factory, as well as other investments, at the company’s AGM on June 22. This was quickly followed up by news agency DFA – again citing anonymous insiders – which reported that such a facility could cost up to 10 billion euros, and would likely be located in Salzgitter, Lower Saxxony.

A VW spokesperson dismissed the reports as speculation.

At present VW’s Salzgitter plant, one of the world’s largest, produces internal combustion engines. Yet such a change in direction is necessary if VW is to distance itself from the “Dieselgate” emissions scandal of last year, and to make good on its intention to become a world leader in electro-mobility technology by 2018.

Moreover, the company wants to produce 1 million EVs/PHEVs by 2025. Along the way that will also involve the Group – which includes Audi, Porsche, SEAT, Bentley and more – bringing 20 new electrified cars to market by 2020.

 

Emissions impossible

It’s a bold strategy, and probably the kind VW needs to wash away the PR nightmare of the emissions scandal. Yet at present, the group only has 3 EVs to offer, none of which have sold well in comparison to rivals like the Nissan Leaf.

The battery plant may also be a risky move. As EV whizz Steve Levine points out over at Quartz, it represents a big gamble given that Asian suppliers already have the expertise, solved many of the issues in mass producing cells and are likely already using the best li-ion chemistries available. Even spending double the amount touted by Tesla for its Nevadan Gigafactory, VW could struggle to live up to its ambitions.

Yet with Germany’s recently approved EV incentives, perhaps VW is making a sound bet. Germans prefer domestically-made cars, and they’ll soon be offered healthy rebates and subsidies to choose affordable electric cars. VW would also maintain its reputation as a major industrial employer.

Indeed, as VW Chairman Herbert Diess told German press last year: “I think we need a battery manufacturing in Germany. This is the core technology of electric mobility.” With Tesla locked out of the competition for now, the time may be right for VW to make a break for EV pole position.

 

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