Volkswagen Group today launched a new battery company called PowerCo, started construction on the company’s first battery cell factory in Salzgitter, Germany. The move is part of the Group’s larger New Auto strategy, which was introduced in July 2021.

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Volkswagen Group is the parent company of the Volkswagen, koda, Seat, Cupra, Audi, Ducati, Lamborghini, Volkswagen Commercial Vehicles, Bentley and Porsche brands.

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“Today we are not only laying a foundation stone but also marking a strategic milestone,” said Herbert Diess, CEO of Volkswagen AG, in a statement. “The battery cell business is one of the cornerstones of our New Auto strategy which will make Volkswagen a leading provider of the sustainable, software-driven mobility of tomorrow. Establishing our own cell factory is a megaproject in technical and economic terms. It shows that we are bringing the leading-edge technology of the future to Germany!”

PowerCo will be responsible for the global business of battery activities for the Group. Its creation represents a $20.3 billion USD investment by the automaker and numerous partners. The Group says that it sees an equal amount of sales potential from the division.

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The new brand will empty 20,000 people in Europe, 5,000 of which will be at the new factory.

Volkswagen Group’s new facility is committed to creating a “green unified cell”, which will be produced with green electricity (100 percent from regenerative sources) and have more than 90 percent recyclable parts.

It is being created as a blueprint for the company’s future battery facilities, which will include six cell factories in Europe. A factory in Valencia, Spain will be next to open. Additional sites are still being narrowed down.

The Group is exploring the possibility of opening gigafactories in North America.

“In building our first in-house cell factory, we are consistently implementing our technology roadmap,” said Thomas Schmall, Member of the Board of Management of Volkswagen AG responsible for Technology and Supervisory Board Chairman of PowerCo.

“PowerCo will become a global battery player. The company’s major strength will be vertical integration from raw materials and the cell right through to recycling. In future, we will handle all the relevant activities in-house and will gain a strategic competitive advantage in the race to take the lead in e-mobility. We have secured a top team for this great undertaking.”

When it opens, the Salzgitter plant is expected to reach an annual capacity of 40 gigawatt-hours (GWh), enough for 500,000 electric vehicles. When all planned European plants are operational, the total possible volume will be 240 GWh.
In addition to cells, PowerCo will work to vertically integrate the value chain, and supply of machinery and equipment to the factories.

Volkswagen Group anticipates a production start date of 2025 for the factory in Germany.

“The ground breaking at the Salzgitter plant sees VW’s next steps in executing its transition to electric vehicles. The company announced 2021 that it would build six European battery plants by 2030,” Stephanie Brinley, an automotive analyst at S&P Global Mobility, told Newsweek.

“While the company has not yet announced specifics about its US or North American battery production, an earlier announcement that it is investing $7.1 billion into EV production and development in North America is certainly indicator that it are likely to produce batteries here as well as in In other regions. In the US, VW is targeting 55% of its sales to be EVs in 2030; to reach that will require investment into manufacturing as well.”