Volkswagen is hoping to be a major player in the auto industry's electric future. The world's biggest automaker announced this week that it had reached an agreement with Northvolt, a Swedish electric component manufacturer, to build a battery factory in Germany. The automaker also confirmed production dates for two new VW models.
Production of lithium-ion batteries will likely begin in late 2023 or early 2024, which would allow Volkswagen's (VLKAF) to mount "the largest electric offensive in the automotive industry worldwide." In the next decade, the Volkswagen Group is projected to introduce approximately 70 new electric models and assemble 22 million electric vehicles. It will invest more than $33 billion into electrifying its fleet over the next four years in response to pressure from regulators and the backlash from its diesel emissions scandal.
The German automaker hopes to surpass rivals such as Tesla (TSLA) and Warren Buffet-backed BYD in China. Lithium-ion batteries, most of which are currently produced in China, are an integral part of Volkswagen's electrification strategy. Batteries comprise about a third of the cost of electric cars, according to consulting firm Wood Mackenzie.
China has 70% of the global lithium cell manufacturing capacity, while the United States has at 12%, said Simone Tagliapietra, a climate and energy fellow at Bruegel, the European economic think tank. Meanwhile, Europe only accounts for 3% of global production capacity, according to the European Commission. The Volkswagen-Northvolt deal, which would stimulate the industry, is a "very significant investment for the future of European battery production," Tagliapietra told CNN Business.
Volkswagen will invest $993 million into the Northvolt joint venture with part of the money going into the German factory, while the rest will provide Volkswagen a 20% stake in Northvolt and a seat on its supervisory board.
Volkswagen has stated that production of the new ID.3 electric car series will begin in November, with the first units delivered to buyers next year. The limited edition of the ID.3, which will debut on September 9 at the Frankfurt Motor Show, is already sold out. An electric version of the vintage Volkswagen Beetle, developed by a partner company eClassics using components from the new VW e-up! city car, will also premiere in Frankfurt. In addition, Porsche, a Volkswagen premium brand, will begin producing its first all-electric sports car — the Taycan — on September 9.
Volkswagen will invest nearly $1.5 billion into revamping its Zwickau manufacturing plant, which previously produced internal combustion engines so that it can manufacture electric vehicles. The overhaul began in 2018 and will be completed by 2020. By 2021, the plant is projected to produce 330,000 cars per year, making it Europe's "largest and most efficient electric vehicle plant," according to Volkswagen. The ID.3 will be the first car assembled on this new modular electric-car production platform or MEB. In the next three years, production of 33 VW models will begin on the MEB.