(Bloomberg) -- Volkswagen AG is deepening its European battery supply chain with a 3 billion-euro ($2.9 billion) joint venture to make battery materials that feed growing electric-car demand amid tightening legislation on local production.
The equal venture with Belgium’s Umicore SA, which will supply VW’s upcoming battery cell factories in Germany and Spain with cathode and other precursor materials, plans to start operation in 2025, the companies said Monday. By the end of the decade, the JV is aiming to power about 2.2 million fully-electric cars, equivalent to about 160 gigawatt hours.
The decision to go deeper into the battery supply chain partly reflects recent legislation in the US and Europe for a “local-for-local” procurement strategy with fewer but stronger partners, Thomas Schmall, VW’s technology head and chairman of VW’s battery venture PowerCo, said during a call with reporters.
“Local laws and decisions are forcing everyone to invest in their local regions,” Schmall said.
Earlier this month, European Commission President Ursula von der Leyen proposed the European Critical Raw Materials Act to build out Europe’s supply chain for battery and other raw materials. The plan includes a framework for sourcing, extraction and recycling of raw materials vital to the bloc’s plan to become carbon neutral by 2050. VW and Umicore are looking at integrating the new potential EU sourcing requirements beginning in the second half of the decade, said Ralph Kiessling, Umicore’s vice president of energy and surface technologies.
A decision on the JV’s production site location is set to come “in the next months,” with logistics and funding both playing an important role, Umicore’s Chief Executive Officer Mathias Miedreich said.
Monday’s announcement advances a pact outlined in December as both Volkswagen and Umicore invest in the battery cell production supply chain. Umicore last week inaugurated a cathode plant in Poland, and Europe’s biggest automaker is establishing six battery plants in the region to enable the industry’s most ambitious rollout of electric cars, with a plan for 50 purely battery-powered models by the end of the decade.
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