BERLIN -- Volkswagen Group more than doubled its forecast for the supply of EV battery cells that it will need to help reach its target of becoming the global leader in electric cars.
VW said on Tuesday that it will have to source more than 300 gigawatt hours of annual supply in 2025, increasing its 2017 prediction for 150 GWh capacity. The forecast is for VW's needs in Europe and Asia. VW did not make a forecast for future requirements for any other global markets including the U.S., which will further increase its supply needs.
The prediction takes into account new, more stringent CO2 fleet emission targets in the European Union. In December, the EU agreed to mandate automakers to reduce CO2 emissions by 37.5 percent by 2030 compared with 2021 levels. This means automakers will have to accelerate plans to electrify their lineups.
VW's supervisory board agreed on Monday to build a 1 billion euro ($1.12 billion) 10 GWh cell plant in Germany. The factory will be located in Salzgitter in VW's home state of Lower Saxony close to its future electric vehicle manufacturing plants Zwickau, Hanover and Emden.
VW will partner with Sweden's Northvolt for the factory, which has not said whether it would invest a further sum into the factory. In March, the two companies formed the European Battery Union to advance research in cell technology. Northvolt, founded by two former Tesla managers, plans to spend 3 billion euros to build Europe’s biggest battery cell plant in Sweden, a project to rival U.S. electric automaker Tesla’s Gigafactory.
VW Group procurement and components chief Stefan Sommer said the start of production at the Salzgitter plant was scheduled as early as the end of 2022.
Sommer said the factory would be profitable. "Our plan currently foresees that in principle we would be competitive in the current market environment with the first 10 gigawatt hours," Sommer said.
Bernd Osterloh, Volkswagen labor leader and an influential director on VW's supervisory board, told employees in an internal letter that the preliminary decision for the first cell plant in Lower Saxony was a "great success" for the unions, since they had advocated for years to build one.
Lower Saxony Premier Stephan Weil, also a VW board member, said the decision was a "breakthrough" for a structurally weak area of the state. Weil warned that further potential investments would be more difficult to justify economically without state aid. He said eastern European countries are offering heavy subsidies.
"If we want to play a role in Germany in battery cell production, either the country will need to come up with its own incentives or the European Union will have to intervene to guarantee there is a level playing field," Weil said.
VW this month started a pre-booking marketing campaign for the ID3, a Golf-sized battery-powered car that will launch the automaker's 30-billion-euro ($34 billion) strategy to topple Tesla as the electric-car leader.