Volkswagen enters EV battery business with PowerCo

By 2030, the Volkswagen Group intends to operate 6 cell factories with a total volume of 240 GWh throughout Europe together with partners.

Ceremonial start of construction for the cell factory in Salzgitter. L-R: Frank Blome, CEO PowerCo; Daniela Cavallo, Chairwoman of the Group Works Council Volkswagen; Stephan Weil, Prime Minister of Lower Saxony; Herbert Diess, Chairman, Volkswagen; Olaf Scholz, Federal Chancellor; Thomas Schmall, Member Volkswagen Board of Management for Technology and Chairman of the Board of Management at Volkswagen Group Components; Hans Dieter Potsch, Chairman of the supervisory Board of Volkswagen.

German auto major Volkswagen is accelerating plans to strengthen its electric vehicle business. The Group broke the ground for its first cell factory in Salzgitter, Germany in the presence of German Chancellor Olaf Scholz. With production slated to begin in 2025.

The OEM has set-up a new company christened PowerCo, which with immediate effect will be responsible for its global battery business. In addition to cell production, the new company will be responsible for activities along the entire battery value chain. Up to 2030, PowerCo is expected to invest more than 20 billion Euro (Rs 1,64,940 crore) together with partners in the development of the business area, to generate annual sales in excess of 20 billion Euro and to employ up to 20,000 people in Europe alone.

Herbert Diess, CEO, Volkswagen said: “Today we are not only laying a foundation stone but also marking a strategic milestone. The battery cell business is one of the cornerstones of our New Auto strategy which will make Volkswagen a leading provider of the sustainable, software-driven mobility of tomorrow. Establishing our own cell factory is a megaproject in technical and economic terms. It shows that we are bringing the leading-edge technology of the future to Germany!”

The Volkswagen Group is bundling its global battery activities in the European company (SE) PowerCo. From Salzgitter, the company will, with immediate effect, manage international factory operations, further development of cell technology, vertical integration of the value chain and the supply of machinery and equipment to the factories. Going forward, further products such as major storage systems for the energy grid are also planned.

Volkswagen Group states that following Salzgitter, the next cell factory is to be established at Valencia. The sites are currently being identified for three further cell factories in Europe. In addition to Europe, PowerCo is also already exploring the possibility of further gigafactories in North America.

PowerCo will be headed Frank Blome as CEO and Board Members Sebastian Wolf (COO), Kai Alexander Müller (CFO), Soonho Ahn (CTO), Jorg Teichmann (Chief Purchasing Officer) and Sebastian Krapoth (Chief Human Resources Officer).

Thomas Schmall, Member of the Board of Management of Volkswagen responsible for Technology and Supervisory Board Chairman of PowerCo said: “In building our first in-house cell factory, we are consistently implementing our technology roadmap. 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. In future, we will handle all the relevant activities in-house and will gain a strategic competitive advantage in the race to take the lead in e-mobility. We have secured a top team for this great undertaking.”

Daniela Cavallo, Chairwoman of the General and Group Works Council of Volkswagen said: “Today is a day to celebrate. At the heart of Europe, we are creating a new future-oriented segment and up to 20,000 future-proof jobs, including 5,000 in Salzgitter alone, at the home of Volkswagen. Our heartfelt commitment and responsibility for the transformation of our proud engine plant and the exemplary retention of secure jobs for its employees continues. This principle remains one of our guiderails, just as it has been in the future-oriented area of the battery from a very early stage, is firmly anchored in the Pact for the Future and has been robustly defended for many years. As a result of these efforts, we now have a showcase for ecological and social transformation.”

The Minister-President of Lower Saxony, Stephan Weil, said: “At Salzgitter, we can see the transformation of the automotive industry more clearly than at any other location in Germany. Battery cells are soon to be produced where conventional engines are still rolling off the production line. Jobs for the future are being created here. The heart of the automotive industry will be electric in the future. And it will be beating in Lower Saxony.”

Frank Blome (pictured above), CEO, PowerCo said, “What we have put to the test millions of times over with vehicle platforms such as the MQB and MEB will also lay the foundation for establishing cell production: we will be standardising on the basis of European standards and upscaling. This way, we will combine speed and cost optimisation with the highest quality levels.”

The OEM says standardisation will not only cover equipment, buildings and infrastructure but also products, processes and IT. This way, factories that can rapidly be converted for further product and production innovations will be created. Each factory will be operated 100% on electricity from regenerative sources and will be designed for future closed-loop recycling.

Federal Chancellor Olaf Scholz puts a test cell in the test chamber (in the background: Stephan Weil, Prime Minister of Lower Saxony)

Volkswagen also unveiled the prismatic unified cell announced at the Power Day in 2021. This allows the flexible use of a raft of different cell chemistries and will be used in up to 80% of all Group models. At Salzgitter, unified cells for the volume segment are to be produced from 2025 onwards. In future, the plant is to reach an annual capacity of 40 GWh –enough for about 500,000 electric vehicles. By 2030, the Volkswagen Group intends to operate 6 cell factories with a total volume of 240 GWh throughout Europe together with partners. The new unified cell harnesses synergy effects and will reduce battery costs by up to 50%. The prototypes produced to date have demonstrated highly promising performance with respect to range, charging times and safety – essential prerequisites for a future industrial standard.

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