Volkswagen to Invest in Mines to Lower Cost of EV Batteries
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Volkswagen to Invest in Mines to Lower Cost of EV Batteries

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Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Fri, 03/17/2023 - 14:27

Through its battery unit PowerCo, Volkswagen plans to invest in mines to lower the cost of battery cells, fulfill half of its own demand with plants in the EU and North America and sell to third-party customers.

Volkswagen was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant. “In the future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” Thomas Schmall, Board Member, Volkswagen, tells Reuters. He adds that there is still not an exact date for Volkswagen’s direct investment in mines.

The acquisition of batteries at a reasonable cost remains a major challenge for OEMs looking to scale up EV production and make them more affordable. Automakers are seeking greater control over parts of the supply chain traditionally left to third parties, competing for scarce resources in the race toward electrification. “The bottleneck for raw materials is mining capacity. This is why we need to invest in mines directly,” says Schmall.

Over the past few years, Volkswagen has made significant global investments in battery production as part of its long-term strategy to become a leader in the EV market. The company plans to invest about US$86 billion in electromobility and digitalization, with a large percentage of that going to battery production. The automaker has set itself the goal to produce 240 GWh of batteries annually by 2030, which is enough to power about 4 million EVs. Only Tesla has pledged more investment into battery production than Volkswagen, according to an analysis by Reuters.

Although automakers have not disclosed direct stakes in mines, several OEMs have struck deals with producers to source lithium, nickel and cobalt and pass them onto their battery suppliers. Volkswagen’s PowerCo, set up last year, is targeting over US$21 billion in annual sales by 2030.

After two years of prices labeled as “insane” by Elon Musk, CEO, Tesla, and “unreasonable” by China’s BYD, lithium will become less expensive as more supply emerges to cut abnormally high margins for lithium producers, according to Wang Pingwei, President, Sinomine Resource Group Co, as reported by MBN.

Mexico has significant lithium reserves, but the country's production and exploration of lithium have been limited compared to other countries such as Chile and Argentina. In recent years, there have been efforts to increase lithium exploration and production in Mexico, but the nationalization of the mineral and the creation of LitioMx, have delayed the production of lithium, especially because some private companies already had a permit.

So far, Mexico has not produced any lithium and the country’s government must ramp up studies so the country can begin its production, says Ramón Luna, President for Sonora, AIMMGM.

According to Luna, once lithium is extracted, it will generate economic benefits for the country. Nevertheless, it is difficult to determine the scale of such benefits as there is limited data regarding Mexico's lithium reserves. “It is important to note that Sonora has a great potential for lithium exploration, nonetheless, it is also important to complement exploration with studies that detail the exact amount of lithium we have,” says Luna.

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