VW has big ambitions to bring down EV costs, starting with the battery cells. To do so, the automaker looks to invest in mines as it looks to vertically integrate. Through PowerCo, VW plans to meet half of its own demand while selling to other automakers like Ford.
It’s been a busy month for Volkswagen, starting with the release of the upgraded ID 3 with improved design and features.
VW followed the new ID 3 up with its affordable EV concept, called the ID 2all. The ID 2all starts at less than $27,000 (€25,000) and features up to 279 miles range (450 km).
There have also been reports that the automaker is developing its smallest, cheapest EV model yet, likely to be called the ID 1 (or ID Polo) that will start around $20,000 and expected to arrive in 2027.
Both the ID 2all and ID 1 (or ID Polo if you will) take design elements from Volkswagen classics like the Beetle and Golf. To bring EV costs down, CEO of VW Passenger Cars, Thomas Shafer says, “It’s not an easy game” but with several teams working together, he adds:
That volume will help us to bring prices down to be competitive and also still make money.
Shafer is referring to using its economies of scale as an advantage to drive volume and bring down costs.
VW signed an agreement with Canada last year to aquire raw materials needed for EV batteries as it moved to qualify for the US tax credit.
However, with the battery being the most expensive component in an EV, the automaker has a plan to overcome this, by going straight to the source, according to a new report from Reuters.
VW eyes mining investment to bring down EV costs
Earlier this week, Volkswagen announced it had officially selected St. Thomas, Ontario, as home for its first North American Powerco EV battery plant.
Volkswagen chose Ontario, Canada for its access to abundant raw materials and clean energy. Now, the company looks to take it a step further with plans to invest in mines to vertically align its business and bring EV battery costs down.
According to the automaker’s board member in charge of technology, Thomas Schmall, VW looks meet half of its own demand with the cells and will also sell to third-parties, including Ford, adding:
The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly.
The board member says Powerco will begin delivering battery cells to Ford to help the automaker build 1.2 million vehicles on its MEB platform.
GM is another automaker looking to grab a mining investment, with reports suggesting a possible stake in Vale’s base metal spinoff.
The Volkswagen Group recently intensified its EV efforts, investing nearly $200 billion (€180 billion) euros over the next five years to ramp production. A big chunk of the investment is going toward scaling battery cell production through PowerCo and the associated raw material costs.
Volkswagen is headed in a direction I think many automakers will take – to vertically integrate. The automaker wants to be one of the premier global battery suppliers in the future through its PowerCo business.
The company expects PowerCo to generate a profit of more than $21.4 billion (€20 billion) by 2030 on its way to becoming an EV battery powerhouse.
If Volkswagen were to introduce an electric vehicle for around $20,000, and profitably, investing in mines directly and vertically integrating the business will be the first steps.