VW breaks ground on new battery factory, will invest €20b into “PowerCo” spinoff

VW has announced another big battery investment, this time committing €20 billion to battery production through 2030 with a new battery production spinoff named “PowerCo.”

The announcement was made at the groundbreaking ceremony for its new battery factory in Salzgitter, Germany, the first of six plants in Europe as unveiled at VW’s “Power Day” event last March.

“PowerCo” has the potential to eventually produce up to €20 billion in annual revenue, according to VW.

VW expects that their battery plants will eventually employ up to 20,000 people across Europe. The initial plant in Salzgitter will employ up to 5,000 with cell production starting in 2025. The plant will eventually reach 40GWh annual production capacity, enough for around half a million electric vehicles per year.

After Salzgitter, VW plans another plant in Valencia, Spain, and sites are being evaluated for the remaining plants, including the possibility of plants in North America. Each plant will produce 40GWh of batteries per year for a total of 240GWh.

The plants will run on 100% renewable electricity. Each plant will be designed to have future closed-loop recycling systems on-site, allowing for the capture of up to 90% of raw materials from battery packs at end of life.

VW is developing a unified prismastic cell to use across its model line, which it talked about at its Power Day event. The plan is to drop battery costs by about 50% from today, down to around $100/kWh.

Despite VW’s big battery investments, supply remains constrained for their current vehicles. All of VW’s 2022 EV production is essentially sold out, meaning that most buyers will have to wait until next year to get one. EV demand is incredibly high right now and supply has not ramped in tune with demand, alongside supply disruptions across the world due to the ongoing COVID-19 pandemic. The recent global rise in gas prices has added more fuel to the fire (no pun intended), showing even more people the benefit of electric vehicles.

While Voltswagen leads the industry in battery and EV production investment commitments, many other automakers are investing heavily in battery cell production as well. But all of these battery factories will take some time to come online. So relief for EV supply constraints is probably going to take some time to come online, and, as Seth opined recently, it may be that EVs will remain supply constrained for the foreseeable future.

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