How Volkswagen’s Latest Battery Production Plants May Drive Down Electric Vehicle Costs

Batteries are the most important component of any electric vehicle, but many car makers don’t make their own batteries. Volkswagen just revealed it’s creating a subsidiary company to manufacture battery cells for EVs.

Volkswagen broke ground on its first battery cell factory today in Salzgitter, Germany, which is planned to start manufacturing EV batteries in 2025. The company is also planning locations for three other cell factories in Europe, and possibly others located in North America. Volkswagen is also moving its battery cell operations to a new subsidiary, called ‘PowerCo,’ which will spend more than €20 billion ($20.35 billion) by 2030 on manufacturing.

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Volkswagen currently purchases battery cells from other companies , such as LG Energy Solution and SK Innovation, which are then used in the assembly for cars like the ‘ID’ series. Volkswagen is hoping that taking over battery cell production will result in more environmentally-friendly design and lower costs — the latter of which could mean lower prices on EVs in the future. The company said its prototype ‘prismatic unified cell’ batteries “will reduce battery costs by up to 50 percent” and “have demonstrated highly promising performance with respect to range, charging times and safety.”

Most car manufacturers have been hesitant to produce their own EV batteries, relying on other companies for at least part of the process. Tesla is the main exception right now, which recently started producing its own battery cells for its Model Y SUV. Toyota, Stellantis (formerly Fiat Chrysler), Ford, General Motors, and others have announced factories for battery cells, but most (if not all) of them are in partnership with existing manufacturers like LG.

Source: Volkswagen