VW, PowerCo, Umicore Establish Joint Venture For European Battery Materials Supply Chain

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There are a number of reasons for battery constraints, including limited access to key materials, low manufacturing yields and an increasing demand for batteries from multiple industries. And, this won’t ease up any time soon. As the world continues moving toward electric vehicles, the demand for batteries is going to outpace supply for years.

Why years? Because setting up a new mining operation, refining facilities, and battery production facilities can’t happen overnight. Getting a new mine up and running is particularly difficult and time consuming. So, deals need to be made years in advance to make sure that an automotive manufacturer has enough supply to meet their EV manufacturing needs.

We keep reporting on battery deals manufacturers are making for battery production, minerals, and other components because it’s going to make the difference between adopting EVs or having to do other things because there isn’t enough battery supply to go around.

VW’s New Deal For Recycled Battery Materials

From 2025 onward, the joint venture between PowerCo, the new battery business of the Volkswagen Group, and Umicore, the Belgian circular materials technology company, will begin producing precursor and cathode materials in Europe. The partnership will provide European battery cell manufacturers with key chemicals supplied by PowerCo.

The partners’ aim by the end of the decade is to produce cathode material and their precursors for 160 GWh cell capacity annually. This compares to an annual production capacity that could power about 2.2 million full electric vehicles. Cathode active materials are crucial for a successful powertrain transition towards e-mobility because they are key levers affecting battery performance, as well as the biggest single contributor to overall battery cost.

“Cathode material is an indispensable strategic resource for battery production, accounting for roughly fifty percent of overall cell value.” said Thomas Schmall, Group Board Member for Technology at Volkswagen AG and Chairman of the Supervisory Board of PowerCo SE. “Immediate and long-term access to extensive capacity is thus a very clear competitive advantage. We are setting up a sustainable, transparent supply chain with high environmental and social standards, localizing value creation here in Europe.”

The strategic, long-term relationship is focused on European precursor and cathode material production, which are important input materials that contribute to battery value creation. Under the terms of further agreements, Umicore and PowerCo will collaborate on the sustainable and responsible sourcing of raw materials, where Umicore is a market leader. Umicore will also offer PowerCo refining services. And, with Umicore’s technology and expertise, both companies plan to add battery recycling to the JV at a later stage.

The JV is set to begin production in 2025 to provide PowerCo’s Salzgitter factory and has an annual capacity of 40 GWh. The goal for both partners is to raise the JV’s annual production rate by 2030 so it can reach 160 GWh, which all depends on how the market develops. The search for a suitable location for the factory site is still underway.

“This partnership is a strong signal of recognition of our product and process expertise and a testament to the success of our strategy to establish sustainable industrial-scale, closed loop battery materials value chains in key regions.” said Umicore CEO Mathias Miedreich. “We are supporting our customers on their path to electrification right from the start, and are very pleased to partner with PowerCo and support Volkswagen in their fast transformation towards sustainable electric mobility.”

Under the terms of the partnership, both parties will have equal say in managing the JV and will share expenses, investments, earnings, and advantages equally. Both partners anticipate that the e-mobility market in Europe will become increasingly competitive in future years as a result of their joint investment of three billion euros into new materials manufacturing capabilities.

PowerCo and Umicore have entered into a collaboration that will provide the firm with secure and cost-effective access to Umicore’s cutting-edge, sustainably sourced, and custom-tailored high-performance battery materials for its unified cell approach in Europe. It will enable PowerCo to take advantages of Umicore’s established production capabilities as well as upstream knowledge. In return, it will offer secure access to an important portion of European EV cathode material demand at assured value creative returns for Umicore.

The JV is meant to satisfy both partners’ profit and return requirements, allowing them to unlock significant synergies and economies of scale for each side. To maintain its leading technology position, Umicore’s IP and expertise will be licensed to the JV through a license agreement.

“We are consistently entering the holistic value creation of the battery. A supplier industry for battery materials on the scale required does not yet exist today.” said Jörg Teichmann, PowerCo Chief Procurement Officer. “We are changing that through our long-term cooperation with Umicore as a global market leader for the key materials used in cell production.”

PowerCo stated that The availability, cost and technical performance of battery cells are key requirements for the successful ramp-up of e-mobility. By building up substantial production capacities, we will be able to meet the rapidly growing demand for these materials from our main customer Volkswagen AG in terms of volume and at optimal cost.

The deal is still subject to regulatory approval and other closing conditions. The name of the joint venture has not yet been chosen, but it will be revealed at a later date.

Why This Matters

One of the big criticisms of EVs is that battery materials come from environmentally unfriendly and sometimes unethical sources. This partnership is a strong signal that the EV industry is committed to changing that. Not only will the JV be using Umicore’s cutting-edge, sustainably sourced battery materials, but it plans to add battery recycling to the mix at a later stage. This will help close the loop on EV battery materials and make the industry more sustainable in the long run.

It’s also a sign that the EV industry is starting to mature. Volkswagen is the world’s largest automaker, and Umicore is one of the leading suppliers of battery materials. That this maturing is including recycling and more environmentally friendly practices is a great development.

Featured image: PowerCo and Umicore establish joint venture for European battery materials production (from left to right: Thomas Schmall, Group Board Member for Technology at Volkswagen AG and Chairman of the Supervisory Board of PowerCo SE, Jörg Teichmann, PowerCo Chief Procurement Officer, Ralph Kiessling, EVP Energy & Surface Technologies at Umicore, Umicore CEO Mathias Miedreich). Image provided by Volkswagen.