Volkswagen to invest $20 billion in building its own electric vehicle batteries

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Volkswagen AG (VKW.L) said on Thursday it would invest $20.38 billion to build battery electric vehicles, a move the company says will create 20,000 jobs and generate 20, $38 billion in annual sales.

The automaker will create a new company called Power Co to oversee the broad effort as Volkswagen moves forward to secure enough capacity, materials and supplies to fuel its electric vehicle ambitions.

Power Co will manage VW’s entire battery supply chain, from research and development of new technologies to raw material extraction to end-of-life recycling. The news was announced during a groundbreaking ceremony for the company’s first battery factory in Salzgitter, a town in Lower Saxony in Germany.

VW CEO Herbert Diess said in a statement: “The battery cell Company is one of the cornerstones of our New Auto strategy that will make Volkswagen one of the leading providers of the software-driven sustainable mobility of tomorrow. Establishing our own cell factory is a mega-project in technical and economic terms. It shows that we are bringing the cutting-edge technology of the future to Germany!”

Last year, the company announced plans to build six battery cell production plants in Europe by 2030, including the plant in Salzgitter and one in Skelleftea, Sweden. A third factory will be established in Valencia, Spain, and the fourth factory will be based in Eastern Europe. The company is also exploring plans to build future gigafactories in North America. The plants will eventually have a production capacity of 240 gigawatt hours per year.

From 2023, VW plans to roll out a new unified prismatic cell design of its batteries that will be installed across all brands of the automaker. The goal is for this unified cell design to power up to 80% of VW’s electric vehicles by 2030.

The company has also signed contracts with two other major battery producers, Samsung and CATL. And the company is backing a San Jose, Calif.-based start-up, QuantumScape, which is working on more energy-efficient solid-state batteries.

VW, which is the world’s second-largest automaker by volume, has encountered problems in its switch to electric vehicles. The company’s CEO recently said that VW was “essentially sold out on EVs in Europe and the US for the year”, meaning anyone hoping to get an EV from VW, Audi or one of the group’s other brands may have to wait until 2023 as it tries to set up production of electric vehicles.

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