Published on July 1st, 2016 | by Zachary Shahan25
Volkswagen Aims To Build 1st Battery Gigafactory In China (Rumor)
July 1st, 2016 by Zachary Shahan
Context and commentary: Volkswagen is one of those interesting cases you find in an industry entering disruption. Last year, it briefly rose to the top of the auto world, becoming the largest global automaker. It only held the trophy for a few moments, though, because it got busted for massive cheating. Why did it (and others, it turns out) cheat? Because that was an easier way to meet fuel-economy standards and consumer desires while continuing to profit from competitive advantages and sunk costs related to internal combustion engines (gas & diesel cars) — easier than a quick transition to electric vehicles, which a World Energy Council report just determined are absolutely necessary to meet 2020 fuel-economy standards around the world.
But the disaster was also a blessing. Now, Volkswagen is essentially being forced to change more rapidly than its sluggish, dinosaur-age automobile cousins. Volkswagen’s stock is crashing anyway and investors want to see it make a swift shift to the clean car tech of the future (hint: not diesel). So, Volkswagen is writing off sunk costs related to ICE cars and investing heavily in an electrified future.
How do you know when an automaker is getting serious about electric cars? Well, given the amount of PR fluff in the auto world, and the size of the industry, that’s tough, but these are 4 strong clues for me:
- They start putting a lot more money into them. (That’s an obvious one.)
- They start building compelling fully electric cars.
- They put a huge hand into the battery side of things — since this is one of the the key places you get competitive advantage in the 21st.
- They put a real hand into long-range, super-fast charging for fully electric cars.
It seems Volkswagen is doing #1, and a big part of that is #3, going by recent rumors. #2 is still unclear, but a few fully electric concept cars from Volkswagen Group look like they could be compelling, cost-competitive vehicles. There is not strong sign #4 is happening, but there may be behind the scenes, and there are also people who disagree with me on this point.
Regarding #3, we recently reported on a rumor that Volkswagen was considering an investment of $11 billion into battery factory in Germany. That would propel it to the front of the line in terms of conventional automaker leadership in battery manufacturing, which is seen to be a key to driving down battery costs and building cost-competitive fully electric cars. It would also create jobs for a large number of German auto workers who will lose jobs related to ICE cars.
The news: A more recent rumor leaked this week is that Germany won’t be the first place Volkswagen builds a gigafactory (I know — Volkswagen isn’t going to go and use a Tesla term, but I don’t think we have a better name for these yet). Rather, the largest electric car market in the world — China (see here, here, here, here, and here) — would be home to Volkswagen’s first gigantic battery factory.
Automotive News Europe (h/t Autoblog) got the leak, from “a source close to senior management,” and was told that Volkswagen was looking to invest billions of dollars into this factory. To try to better explain the scale of this transition, here’s an important quote from ANE:
Whereas current global automotive cell capacity is estimated at around 27 gigawatt hours of supply for the entire industry, VW believes it alone will need the equivalent of 150 GWh just to power its own fleet. “That is roughly 10 battery plants, each requiring investments of 2 billion euros, so that’s 20 billion in total,” the source said.
More context: Volkswagen aims to have over 30 new electric car models on the market by 2025, and annual unit sales of 2–3 million electrified (with a plug) cars — 20–25% of the company’s sales. The Chinese electric car market may actually be larger than the US and European electric car markets combined this year. Going forward, it is expected to be the largest market. Locating an EV battery factory there ASAP definitely makes sense.
We’ll keep you updated on any more big EV news from Volkswagen and China.
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