Volkswagen Ramps Up Its Electric Car Strategy

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Now the that whole “Should Herbert Diess stay or go?” kerfluffle is finally over — at least for now — Volkswagen has made several announcements in the past few days about how it plans to pick up the pace of its transition to manufacturing electric cars and trucks. On December 8, it reported it has signed 3 strategic partnerships that will help strengthen its battery technology know-how and cost management while increasing the vertical integration of its battery value chain.

Umicore, 24M, & Vulcan Energy

The partnership with Umicore, a global materials and recycling company based in the Belgium, will supply Volkswagen’s battery factories in Europe with advanced cathode materials. Umicore will ramp up its production capacity to the point where it is supplying enough cathodes to the Salzgitter factory for 20 gigawatt-hours (GWh) of batteries by 2025. The ultimate goal is to reach annual production capacity of up to 160 GWh by the end of the decade — enough to power approximately 2.2 million electric vehicles.

The partnership will investigate next generation battery technologies and work to secure responsibly sourced raw materials at competitive prices. Close cooperation to foster cost optimization activities and increase efficiencies in production processes are also on the agenda. Battery recycling technologies will also be on the partnership’s agenda.

24M Technologies, based in Cambridge, Massachusetts, is a spinoff business from MIT. It is a pioneer in semi-solid-state battery technology that began shipping its first products in 2019. Volkswagen has decided to invest in the company to help industrialize its technology, which is a semi-solid process that represents an advancement of the dry coating process used to manufacture automotive batteries today. The goal is to lower the cost of manufacturing batteries by reducing material usage and eliminating several steps from the conventional production process.

Prospective benefits include up to 40% less production area, considerable savings on investment, more efficient product recycling, as well as the reduction of the CO2 footprint of battery production. Implementing the process in large-scale production is targeted for the second half of the decade.

Finally, Volkswagen has inked a long term partnership agreement with Vulcan Energy to supply lithium hydroxide over a 5-year period beginning in 2026. Vulcan is currently developing a project to produce CO2-free lithium in the Upper Rhine Valley from lithium-rich geothermal brine. Its Zero Carbon Lithium project aims to establish a sustainable and regional source of lithium from Europe’s largest deposit. The production process does not require fossil fuels or evaporation ponds. The partnership will help Volkswagen meet the demand for in-house, emissions-free cell production in Germany and other European countries.

The Latest 5-Year Plan

Also this week, Volkswagen published Planning Round 70, a road map of where the company expects to be in 5 years. The plan is represented by the graphic at the top of this page. Here are the main points of the new plan:

  • In addition to Zwickau and Emden, more European sites to be electrified.
  • Wolfsburg, the Group headquarters and a manufacturing site, will be transformed: partial production of the ID.3 from 2023 agreed; confirmation that Project Trinity will be implemented from 2026 onward.
  • At EUR 89 billion, investments in future areas will make up over half of total CAPEX for the first time.
  • VW Group confirms operating margin target at the upper end of the range of 6–7.5% for 2021, deliveries of around 9 million vehicles anticipated, adjusted net cash flow for the Automotive Division of €15 billion is certain to be achieved.

The plan is dense and detailed. If you want the full skinny, please follow the link above. In essence, it outlines plans to bring electric car manufacturing to most of the company’s factories. Here are some details:

The Group will invest around €21 billion at its plants in Lower Saxony alone, most of which will be channeled into manufacturing sites and components facilities.

  • In the medium term, Hanover will go all-electric, starting a modernization of the site. The Group’s currently most important forward-looking project will be set up in Hanover, where the first Artemis vehicle will be produced. Body manufacturing for a new Bentley model has also been confirmed. Another vehicle derivative, the ID. California, has likewise been approved for the site. In addition, Hanover will spearhead autonomous driving in the Group with the MOIA shuttles and the ID. BUZZ AD1.
  • Electrification of the Wolfsburg plant through Project Trinity has been confirmed. Given the strong demand for electric vehicles, the Group also plans to re-equip the site for full production of the ID.3 from 2024, ensuring profitability with a site package. Before 2024, partial production with supplies from Zwickau is envisaged. This plan will allow the Group to service additional market volumes that Zwickau alone would be unable to handle due to the good long-term capacity utilization forecasts.
  • The German component plants will continue the transformation to e-mobility they initiated in 2015. Along with hardware for charging infrastructure, the Hanover plant will also produce axles for MEB models. In Braunschweig, Salzgitter and Kassel, the Group will invest in expanding the existing MEB production of battery systems, rotors/stators and electric motors. In addition, the plants are already preparing to manufacture key components of the SSP platform. Volkswagen is thus taking the next step in its strategic development into a key provider of electric modules and platforms.
  • The Salzgitter site will be further expanded into a European battery hub. The Group will invest around EUR 2 billion to produce Volkswagen’s unified cell for the volume segment at its gigafactory in Lower Saxony from 2025. Development, planning and control of the battery production will also be brought together in Salzgitter. To this end, the Supervisory Board today approved the establishment of a European company that will combine all of the Group’s battery-related activities and facilitate third-party involvement in the future. The new company will also oversee the strategic partnerships with Umicore, 24M, and Vulcan Energy agreed this week.

Sharp-eyed readers will note in the paragraph about the Hanover plant that there is a reference to the ID. California. What sort of beast is this? It appears the ID. Buzz will spawn a camper variant similar to the one available today in many parts of the world (but not in California!)  The company has not announced any details other than it will be built at the factory in Hanover. Price? Availability? All unknown. Stay tuned.

Porsche IPO?

There is a rumor going around that Volkswagen Group might consider spinning off Porsche as a way to raise the funds needed to pay for the investments called for by Planning Round 70. According to The Guardian, estimates for what Porsche could be worth as a standalone company range between €45 billion and €90 billion.

The Porsche and Piëch families are considering selling part of their stake in Volkswagen to fund a substantial shareholding in a possible Porsche IPO. The families own 31.4% of Volkswagen shares and control 53.3% of voting rights via Porsche SE. They could sell enough shares to raise roughly €15 billion, according to Handelsblatt. They would remain the largest shareholder in Volkswagen, Handelsblatt added, ahead of the state of Lower Saxony, which holds a 11.8% equity stake and 20% of voting rights.

A spokesperson for Porsche SE called the report “pure speculation” while Volkswagen declined to comment. Does that mean there is substance to the rumor? You guess is as good as ours.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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