The Volkswagen Group is set to significantly enhance its collaboration with its Chinese partner, Gotion High-Tech, focusing on the development and production of battery cells for electric vehicles. Announced on Monday, this strategic partnership will see Gotion participating in the battery cell factory being established by Volkswagen in Sagunt, Spain. Additionally, through two new joint ventures, Volkswagen aims to engage directly in Gotion's European projects, which include a battery factory in Šurany, located in the southern part of Slovakia, and a precursor production facility in Kenitra, Morocco.
For Volkswagen, this collaboration is crucial in securing a steady supply of affordable battery cells, while for Gotion, it represents a significant opportunity for global expansion. According to a press release from Gotion in China, their involvement in establishing a "central European cell production site" will provide valuable experience in managing and executing large-scale battery factory projects across Europe.
The majority of the investment is directed towards the Sagunt project, where Gotion will contribute approximately €1.1 billion towards the construction of the battery cell factory, acquiring a 49% stake in the joint venture with Volkswagen. Meanwhile, the Wolfsburg-based automotive giant and its subsidiary Powerco will each invest €235 million for their stakes in the Slovakian and Moroccan projects. A Powerco spokesperson confirmed the planned initiative on Monday, with expectations that contracts will be signed shortly. However, as of the time of this report, no confirmation of completion had been received.
Volkswagen's Quest for Independence from Chinese Battery Suppliers
Volkswagen and Gotion have been collaborating in the realm of battery cells for several years, with Volkswagen initially acquiring a minority stake of about 25% in Gotion, which is headquartered in Hefei, Anhui Province, China, roughly six years ago. The newly announced partnerships will specifically focus on lithium iron phosphate (LFP) cells, known for being a cost-effective alternative to traditional lithium-ion batteries. According to the International Energy Agency, LFP cells recently accounted for over half of the global market for electric vehicle cells, largely due to their popularity in China.
Like all Western manufacturers, Volkswagen has been dependent on Asian battery suppliers but is now aiming to produce a substantial portion of its batteries in-house. A large factory has already been established in Salzgitter, Lower Saxony, with another facility under construction in Ontario, Canada. Both projects are expected to proceed as initially planned, unaffected by the deepened partnership with Gotion, as confirmed on Monday. A few years ago, Volkswagen had ambitious plans for a more extensive network of its own battery factories, including collaborations with the Scandinavian startup Northvolt. However, Northvolt faced bankruptcy, and Volkswagen subsequently scaled down its plans for other initiatives.
Beyond battery cell production, which is critical for electric vehicles, the manufacture of precursor materials, specifically the cathode material—a chemical mixture incorporated into the cells—is also of significant interest. Gotion's announcement mentioned plans to establish a project via the Moroccan joint venture aimed at producing 100,000 tons of lithium iron phosphate cathode material annually.
The total investment for this initiative is estimated at around €480 million, with Volkswagen contributing half of that amount. Gotion will establish a new company in Kenitra for this purpose, where Powerco intends to participate through a capital increase. The dynamics of this project will be reversed; under the proposed plans, Gotion is set to hold 51% of the shares, while Powerco will hold 49%. Consequently, the future joint venture will be controlled by Gotion.
As reported by faz.net.
