VW places $14B Northvolt battery order
European companies strengthen green e-mobility partnership Metal Tech News – March 17, 2021
Last updated 3/21/2021 at 5:18am
As part of a strategy to significantly lower the cost, improve the performance, and minimize the environmental footprint of batteries going into its expanding line-up of electric vehicles in Europe, Volkswagen Group has placed a US$14 billion order with Sweden-based Northvolt.
This massive deal between the European e-mobility partners announced on the eve of Volkswagen Power Day, a March 15 event that laid out the German automaker's roadmap to making the electric car attractive and viable for as many people as possible over the coming decade.
"We aim to reduce the cost and complexity of the battery and at the same time increase its range and performance," Volkswagen Group Components CEO Thomas Schmall said during Power Day. "This will finally make e-mobility affordable and the dominant drive technology."
While the order from Volkswagen is Northvolt's largest so far, the emerging dominant force in European battery making has secured more than US$27 billion in contracts from key customers, including a US$2.38 billion (2 billion euros) contract with BMW Group.
One of the reasons European carmakers are increasingly turning to Northvolt for their batteries is the Swedish company's mission to build the greenest rechargeable batteries in the world.
To accomplish this lofty objective, Northvolt has committed to powering its battery cell manufacturing with 100% renewable energy, using responsibly sourced materials in those batteries, and establishing the capability to recycle battery metals at a giga-scale that matches the emerging new battery manufacturing.
This dedication to sustainability parallels Volkswagen's own commitment to responsibly sourced battery metals and minimizing the carbon footprint of the German automaker's e-mobility transition.
And this transition is taking place at a blistering pace.
Considered the frontrunner to overtake Tesla in global EV sales, Volkswagen delivered 231,600 all-electric vehicles during 2020, more than triple the number sold in 2019. The European automaker plans to introduce 75 all-electric models by 2029 and sell roughly 26 million EVs over that span.
"Volkswagen is a key investor, customer, and partner on the journey ahead and we will continue to work hard with the goal to provide them with the greenest battery on the planet as they rapidly expand their fleet of electric vehicles," said Northvolt CEO Peter Carlsson.
In addition to the sustainability aspect, Volkswagen's decision to place a US$14 billion battery order with Northvolt is part of a larger strategy for a massive increase of battery production in Europe that will lower the cost to produce its rapidly expanding EV line-up.
"Together with partners, we want to have a total of six cell factories up and running in Europe by 2030 thus guaranteeing security of supply," said Schmall.
Volkswagen plans to ramp each of these new gigafactories up to 40 gigawatt-hours of cell production capacity per year.
To accomplish this lofty goal and further leverage the strengths and ambitions of both Northvolt and Volkswagen, the European companies are becoming increasingly intertwined.
With Volkswagen looking to scale up 240 GWh per year of battery manufacturing in Europe, Northvolt has agreed to sell its share Northvolt Zwei, a battery manufacturing plant being built in Salzgitter, Germany under a joint venture between the two companies. Initially envisioned as a 16 GWh plant, the Salzgitter factory will produce a unified cell for Volkswagen's high-volume segment beginning in 2025 and will be incrementally expanded to 40 GWh of annual production.
By consolidating Northvolt's cell production to the Swedish battery maker's Ett gigafactory in Sweden, which is slated to produce up to 40 GWh of battery cell capacity per year by 2024, the partners will achieve further economies of scale, thereby securing the best possible cost and enabling the lowest environmental footprint in the world for cell production.
"On average, we will drive down the cost of battery systems to significantly below 100 euro (US$119) per kilowatt hour. This will finally make e-mobility affordable and the dominant drive technology", says Schmall.
As part of the expanding partnership that is a key to this economies-of-scale battery strategy, Volkswagen is also increasing its ownership in Northvolt.
"Volkswagen will continue to deepen the collaboration and partnership with Northvolt," said Schmall. "They are one of our key battery suppliers as we make the transition to electric mobility – and there is potential to expand this partnership even further."