Volvo Cars has signed long-term, multi-billion dollar agreements with Asian manufacturers CATL and LG Chem to supply lithium ion batteries over the next decade to models from its namesake brand and subsidiary Polestar, the company said Wednesday.
The deal is crucial to helping Volvo reach its goal of having full-electric cars account for half of its global sales by 2025.
“The future of Volvo Cars is electric and we are firmly committed to moving beyond the internal combustion engine,” CEO Hakan Samuelsson said in a release. “Today’s agreements with CATL and LG Chem demonstrate how we will reach our ambitious electrification targets.”
For LG Chem, the deal is an extension of its Volvo business as it already provides the batteries for plug-in hybrid variants of models such as the XC90, XC60 and V60.
Volvo’s first battery assembly line is under construction at its vehicle manufacturing plant in Ghent, Belgium, and will be ready by year-end to start supplying the full-electric version of the XC40 compact SUV, which will be revealed later this year. Plug-in hybrid variants of the XC40 are already made in Ghent.
The XC40 will be the first battery-driven model from the Swedish brand and the second full-electric vehicle from the Volvo Car Group. The first was the Polestar 2.
Both vehicles will be on the road by 2020.
In addition, both battery-driven models will use the Compact Modular Architecture (CMA) that Volvo developed with Chinese sister brand Geely Automobile. CMA also underpins the 01, 02 and 03 from sibling brand Lynk & CO.
The full-electric XC40, Polestar 2 and Lynk & CO 01 will be built on a single production line at a Volvo-operated plant in Luqiao, China.
Volvo also plans to offer full-electric models underpinned by the second generation of its Scalable Product Architecture, called SPA2.
China’s CATL and LG Chem of South Korea have battery contracts with multiple automakers. Both are playing a key role in boosting the output of EV batteries in Europe.
LG Chem was the first Asian supplier to open a battery plant in Europe when it started production at a new Poland facility last year manufacturing cells for Daimler, Porsche, Volvo, Audi, Renault and Jaguar.
The company is already planning to expand annual capacity to 70 gigawatt hours in the next few years from about 3 to 5 GWh now, according to Polish media reports that quoted Jong Hyun Kim, president of LG Chem Energy Solutions.
CATL, short for Contemporary Amperex Technology Ltd., is scheduled to start production at its 240 million euro factory in Erfurt, Germany, in 2022. That factory that will start by supplying BMW.
When asked whether Volvo will also be supplied by the Erfurt plant a spokesman told Automotive News Europe in an email that the company would not comment on sites but added that both suppliers would be present in Europe, Asia and the United States.