Mercedes & Volkswagen Ramp Up Battery Factory Plans

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Battery factories are springing up everywhere you look. As more and more automakers begin offering battery-powered models, they have to decide whether to buy the battery cells they need from suppliers or make them in house.

When Dieter Zetsche was running things at Daimler, he very much believed in letting suppliers do what they do best because it was just too expensive for his company to manufacture its own battery cells. But things have changed since the famously mustachioed Zetsche left the C suite in Stuttgart.

New CEO Ola Kaellenius announced this week that Mercedes has taken a 33 percent stake valued at $1.2 billion in battery cell manufacturer Automotive Cells Company. Stellantis — which Fiat Chrysler is now part of, whereas it was once part of the Daimler empire — owns a third of ACC. Stellantis includes the PSA group of companies — Peugeot, Citroen, DS, Opel, and Vauxhall. French company TotalEnergies owns the remaining third. It is the corporate parent of Saft, the European battery technology company that has done pioneering work on solid-state batteries.

According to Automotive News Europe, Kaellenius says the purpose of the partnership is to develop cells and battery modules and “help ensure that Europe remains at the heart of the auto industry — even in an electric era.” The ACC factories are expected to begin supplying Mercedes from 2025 forward.

ACC originally expected to produce 48 GWh of batteries at two factories but now aims to reach at least 120 GWh by 2030. Daimler will hold two of six supervisory board seats for the battery maker. The companies will work together on battery technology development, including high silicon anode and solid state batteries. (Notice how every company seems to expect solid state batteries to begin powering its electric cars in 2025 or shortly thereafter.)

“Our focus is on Europe,” Kallenius told a press conference. “That is where ACC wants to grow, expand, and develop technologies with us. Together with ACC, we will develop and efficiently produce battery cells and modules in Europe — tailor-made to the specific Mercedes-Benz requirements. This new partnership allows us to secure supply, to take advantage of economies of scale.”

Daimler announced in July it intends to become “all-electric” by 2030, but adds “if market conditions allow,” which is a pretty big escape hatch if things don’t turn out as planned. ACC’s first new battery factory in northern France is scheduled to start production in 2023. A second factory in Kaiserslautern, Germany, is expected to come online in 2025.

Volkswagen Battery Factory In China

Also this week, Volkswagen announced a new battery factory in Hefei, China. The new production facility will deliver over 150,000 battery systems a year for Volkswagen Anhui, the joint venture formerly known as JAC Volkswagen. It will be the German company’s first majority owned joint venture for electric vehicles in China.

The 45,000 square meter facility is expected to start production in the second half of 2023. It will have an annual capacity of up to 180,000 battery systems for vehicles based on the MEB electric car platform. Production at the nearby Volkswagen Anhui assembly plant is scheduled to begin the same year.

“With a significant increase of battery-electric vehicles in the future, we need to focus on keeping key components like battery systems in our own value chain, allowing us to leverage Group-wide synergies and innovations. Volkswagen Anhui and VW Anhui Components Company, alongside our two strong Joint Ventures, are crucial to our electrification strategy and to achieving our goal of the Volkswagen Group China fleet reaching over 40% NEVs by 2030,” says Stephan Wöllenstein, CEO of Volkswagen Group China.

Volkswagen Group is currently building three new MEB battery manufacturing facilities — this one in China, another in Mlada Boleslav in the Czech Republic, and a third in the US near its factory in Chattanooga.

The Takeaway

Mercedes seems to be hedging it bets a bit by taking a stake in a European battery maker, but Volkswagen continues to push its EV agenda forward as aggressively as possible as it strives to become the largest manufacturer of electric vehicles in the world.