FRANKFURT: Volkswagen is in talks with suppliers to secure direct access to raw materials for batteries in electric vehicles (EV) through partnerships, one of its board members told Reuters on Tuesday.
The world’s second largest automaker is trying to exercise more control over key components in its supply chain, such as semiconductors and lithium, to overcome potential bottlenecks and keep its plants running at full speed.
The German automaker is also trying to catch up with competitors like Tesla and BMW, who have already signed supply contracts with manufacturers of lithium, one of the main components of EV batteries.
“We’re all in a race. It’s about producing the cheapest cells, and that requires scaling, ”says Thomas Schmall, Board Member for Technology at Volkswagen.
“In addition to cell production, which is a new business area for us, we have to go into production depth, procure and secure raw materials. This can be done through various forms of cooperation, ”he said.
Having direct control over the supply of raw materials for EV batteries – which also include graphite, cobalt, and nickel – is also critical to getting costs under control, Schmall said.
“80% of cell costs are determined by raw materials. So it is obvious that you have to get more involved.”
While Schmall didn’t identify any potential suppliers, he said Volkswagen’s goal is to have a small number of larger players in order to keep the complexity under control.
The lithium market is controlled by mining companies such as the US company Albemarle, China’s Tianqi Lithium and Chilean Sociedad Quimica y Minera.
Volkswagen is aiming, among other things, to work more closely with the German company BASF, one of the world’s largest suppliers of battery materials, according to two people familiar with the matter.
Both companies partnered with Daimler and Fairphone last week to explore responsibly producing lithium in Chile’s Atacama Salt Flat, which is home to a quarter of the world’s current lithium supply.
Volkswagen wants to overtake Tesla as the world’s leading supplier of electric vehicles by the middle of the decade and, together with partners, is planning to build six battery factories across Europe by 2030.
Schmall said Volkswagen is about to select a partner for its planned battery factory in Salzgitter and hopes to reveal more details in the coming months, adding that all six factories would include strategic partnerships.
BMW has already reached agreements with the US lithium manufacturer Livent and the Chinese company Ganfeng Lithium, one of the world’s leading manufacturers. Meanwhile, Tesla has signed a five-year supply contract for lithium hydroxide with the Chinese Sichuan Yahua Industrial Group.
Volkswagen is also trying to get closer to chipmakers in the face of a global semiconductor shortage, highlighting the numerous fronts it must tackle with its $ 150 billion ($ 182 billion) spending plan.
“It is of strategic importance for automobile manufacturers to strengthen control over the supply chain,” said Ralf Blessmann, head of Capgemini’s automotive division in Germany.
“The current chip crisis has exposed the risks with regard to delivery bottlenecks.”