Volkswagen is building Europe’s first in-house battery factory, eyeing ‘big projects’ in China

The Volkswagen Group inaugurated the first of its six battery factories in Europe last week, marking a step forward in vertical integration. Additionally, the automaker has expanded the software team in China as a way to fulfill its ambition. CEO Herbert Diess said the company was considering “big moves” in the country.

With German Chancellor Olaf Scholz in attendance, Volkswagen began construction of its first in-house cell plant in Salzgitter, Germany on July 7. The production of prismatic unified cells for up to 80% of the automaker’s models will begin in 2025. The plant will reach an annual capacity of 40 GWh in the future.

Volkswagen has announced plans to build six battery plants across Europe with a total volume of 240 GWh. According to a press release, the next cell factory will be established in Valencia, Spain. In addition, the company is studying the possibility of establishing Gigafactories in North America.

Europe’s largest automaker has formed a new company, PowerCo, to manage its global battery business. The battery business is in charge of the factory’s international operations, cell technology development, vertical value chain integration, and machinery and equipment supply. In addition, it has planned products such as major storage systems for the energy grid.

In a press release, Thomas Schmall, member of Volkswagen’s management board and chairman of PowerCo’s supervisory board, said PowerCo’s main strength would be the vertical integration of raw materials, from batteries to recycling.

Until 2030, the battery company is preparing to invest more than 20 billion euros (20 billion dollars) with partners to develop the activity. The aim is to create annual sales in excess of 20 billion euros and to employ around 20,000 people in Europe.

Expansion of China

Besides Europe, Volkswagen is on the way to increasing its influence in the Chinese car market. Featured in a recent video with Chan Qing, CEO of Cariad China, Diess said the automaker will make significant investments in China and employ several thousand software professionals within a few years. Cariad is Volkswagen’s automotive software and technology company founded in 2020.

Diess added that Volkswagen needs to catch up with its competitors in China. They are evolving rapidly, especially in the development of driver assistance systems towards autonomous driving and improving the user experience in cars.

The CEO said that the user experience in China is different and more sophisticated than in other countries. Customers expect much more integrated and digital support. For example, karaoke and a sophisticated speaker system are in demand. People also need indoor cameras to take pictures or live stream.

As a result, Cariad is creating a local software team to improve in-car user experience and upgrade advanced driver assistance systems (ADAS). Diess said Volkswagen concluded years ago that it needed to develop technologies in China for China.

As the company hoarded resources in the world’s biggest auto market, Dies said it wasn’t enough to hire people from other companies. Volkswagen is considering “big moves” in China. He did not provide details.

The CEO’s remarks echoed the announcement made by Cariad in April about its Chinese subsidiary. It was the first outside Europe. Cariad has built a unified software platform and technology stack for all Volkswagen brands, according to its website. The tech stack is expected to launch by mid-decade, with Level 4 vehicle autonomy ready.

The team in China will develop China-specific software products including ADAS and automated driving, next-generation connectivity, smart cockpit and body concepts, big data and operating systems.

The company also said it will double the 600-person team in China by the end of 2023, with 90% local talent. In addition, it sets up a national R&D network, designating Beijing, Shanghai, Chengdu and Hefei as initial centers.

Volkswagen has shown its ambition in China. At the end of June, he organized the world premiere of the ID. AERO concept car in China. It was the brand’s world’s first all-electric sedan.

According to the automaker, the vehicle could offer a range of more than 600 kilometers. The production version for China is expected to go on sale in the second half of 2023, with production starting in Europe the same year.