Volkswagen Invests in Mines to Cut Battery Cell Costs

Europe’s biggest carmaker wants its battery unit, PowerCo to become a global battery supplier, not just produce for Volkswagen’s own needs, Thomas Schmall said.

PowerCo will start by delivering cells to Ford (F.N) for the 1.2 million vehicles the U.S. carmaker is building in Europe on Volkswagen’s electric MEB platform, he said.

Long-term, Volkswagen plans to build enough cells to meet half its global battery needs, with most production capacity located in Europe and North America, according to Schmall.

“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,”he said.

The carmaker was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant.

Schmall declined to comment on further locations under consideration or where or when Volkswagen might invest directly in mines, saying the company would not disclose that information until the market was more settled.

“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” he said.

Making or sourcing batteries at a reasonable cost is a key challenge for carmakers like Volkswagen, Tesla (TSLA.O) and Stellantis (STLAM.MI) as they seek to make electric vehicles (EVs) affordable.

Only Tesla has pledged more investment into battery production than Volkswagen, according to reports, though, even the U.S. EV maker is struggling to ramp up production and is recruiting Asian suppliers to help.

Few carmakers have disclosed direct stakes in mines, but many have struck deals with producers to source materials like lithium, nickel and cobalt and pass them onto their battery suppliers.

PowerCo, set up last year, is targeting 20 billion euros ($21.22 billion) in annual sales by 2030.