VW's battery unit faces supply-chain hurdles on road to IPO

Volkswagen Group’s newly formed battery business is working to overcome supply-chain headwinds as it ramps up production and prepares for an initial public offering.

PowerCo, which bundles the automaker’s global battery efforts, is trying to secure raw materials amid surging prices and logistics issues, according to the unit’s Chief Financial Officer Kai Alexander Mueller.

VW plans to partner with Umicore to source cathode materials, is exploring working with Robert Bosch for machinery and agreed to offtake battery-grade lithium hydroxide from miner Vulcan Energy Resources.

“The supply chain for our business simply does not exist today,” Mueller said in an interview. “What is important is working with suppliers to scale this industry.”

Automakers from VW to General Motors are exploring different business models as they race to electrify their lineups and catch Tesla, the world’s top seller of electric vehicles.

Europe is trying to build up a homegrown battery industry to counter the dominance of Asian suppliers.

PowerCo, which broke ground on its first European factory last week, is expected to invest more than 20 billion euros ($20 billion) in five of its own cell factories by 2030.

VW is building a sixth factory in Sweden via a partnership with Northvolt.

VW’s flagship battery plant in Salzgitter, Germany, will be able to produce 40 gigawatt-hours of cells per year, enough for roughly 500,000 EVs, according to the company.

Salzgitter is home to VW’s main motor factory, and last year the automaker opened a facility there to research, develop and test EV batteries.

VW remains open to float the battery unit after financing it internally and inviting in strategic partners, VW CFO Arno Antlitz said last month, adding that this process would begin next year.

PowerCo is meant to bundle VW’s battery-making activities much in the same way as its Cariad unit is attempting to streamline software efforts. It will oversee activities including procurement, raw-materials processing, product development and plant management.

The push ties into VW’s efforts to streamline decision-making and make the vast conglomerate leaner and more focused.

“We are starting from the beginning to cover all aspects, from the mine to the end product,” Mueller said. “We need to understand the sourcing, pricing to have a competitive product.”