Car manufacturer Volkswagen AG is setting up a joint venture with Umicore, which specialises in materials technology. The parties will jointly build capacity in Europe for the production of precursors and cathode material for batteries. The production is intended for Volkswagen AG's European battery cell production.
Umicore is a Belgian company specialising in materials technology. The company develops technologies and produces materials for high-performance solar cells, among other things. These cells are used in satellites, rechargeable batteries, LED applications and catalysts, among others. Umicore also focuses on recycling; the company extracts precious metals from laptops and mobile phones, among other things.
EUR 89 billion investment in EVs
Volkswagen has been betting widely on EVs for some time. The company announced in December that it would invest as much as 89 billion euros over five years in new technologies for automated and electric driving. This represents more than half of its total investments over this period. Volkswagen's planned investments until 2026 have a value of some 159 billion euros.
The German carmaker aims for at least one of every four cars sold to be fully electric by 2026. To this end, the company focuses, among other things, on the production of its own batteries. To this end, the company has a plant in Salzgitter, Germany. In addition, the company is working on a factory for EVs in the Wolfsburg area. Its headquarters are also located in Wolfsburg. An existing plant in Hanover is being modernised for EV production.
Materials for battery production
The production of battery cells requires various materials. Precursors and cathode materials are examples. With the joint venture that Volkswagen AG is now establishing with Umicore, the company is securing the supply of these materials.
The joint venture will gradually increase production capacity for precursors and cathode material. Production is to start in 2025 with an annual production capacity of 20 GWh. This is intended for a Volkswagen AG plant in Salzgitter, Germany. By the end of the current decade, capacity should grow to 160 GWh annually. This will be enough to power some 2.2 million EVs annually, according to Umicore and Volkswagen AG.
Both parties will benefit
The cooperation offers benefits for both parties. For instance, the joint venture ensures a "secure and cost-competitive supply" of "innovative, sustainably sourced and tailor-made high-performance cathode materials" for Volkswagen's unified cells.
Umicore will secure access to a significant share of European demand for EV cathode materials with the joint venture. This provides economies of scale. And helps the company build on its strategy around materials for clean mobility.
Cathode materials with high nickel content
Among other things, the joint venture will develop cathode materials with a high nickel content. With a view to higher energy density and facilitating longer driving distances, car manufacturers are increasingly switching to this material.
Umicore reports that it will continue to develop its technological and production capabilities alongside the joint venture. In this way, the company intends to continue serving other customers and regions.
However, Umicore is scaling back production of qualified mid-nickel platforms to their minimum offtake commitments. This leads to lower volume forecasts for both 2022 and 2023. These come on top of the negative impact of the global chip shortage. Umicore therefore expects the growth of its cathode material sales volumes in 2022 and 2023 to be lower than expected. And will be lower than the expected growth of the global market. In the medium term, however, the move to cathode materials with a high nickel content should strengthen Umicore's competitive position.
'Supporting customers in electrification'
"As a leader in materials for clean mobility, we are committed to supporting our customers in the automotive and battery cell industries in their electrification strategies. We are very pleased to partner with Volkswagen in this unique joint venture and will bring our long-standing and proven expertise in battery materials, as well as our strong commitment and solutions to today's sustainability challenges," said Mathias Miedreich, CEO of Umicore. "The complementarity of our extensive technology, innovation and industrial know-how, and our shared sustainability convictions will provide a strong framework for the JV and give us a significant first mover advantage."
Thomas Schmall, member of the Executive Board of Volkswagen Group for Technology and CEO of Volkswagen Group Components: "Volkswagen is rolling out its battery cell strategy very consistently and at a fast pace. Volkswagen's unified cell should be a leader in terms of performance, cost and sustainability from the outset. Partnering with Umicore enables us to build an advanced supply chain within Europe where we share common values regarding responsible sourcing of raw materials as well as closed-loop approaches."
The establishment of the joint venture is subject to regulatory approval, among other things.
Author: Wouter Hoeffnagel
