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VW To Give Confidence To Electric Vehicle Battery Suppliers Through Joint Ventures And Financing

VW To Give Confidence To Electric Vehicle Battery Suppliers Through Joint Ventures And Financing
Germany’s Volkswagen Group wants to get the support of battery suppliers for its aggressive plans for mass production of electric vehicles and would be willing to develop joint ventures and make investments in battery production to gain the confidence of battery suppliers
“VW will buy 50 billion euros ($56.57 billion) worth of battery cells and has identified Sweden's Northvolt, South Korea's SKI, LG Chem and Samsung SDI as well as China's CATL as strategic partners,” said VW purchasing chief Stefan Sommer. "Not every supplier is convinced that electric mobility will come on such a large scale. You need to spend more time convincing them to invest in the auto industry," Sommer told the media in an interview.
Its plans for mass production of electric vehicles would require VW to ensure that it has 150 gigawatt hours' worth of battery production capacity in Europe and about 150 gigawatt hours in Asia by 2025, the company said. It also added that this demand would get doubled by 2030.
"These producers need to prioritize between making a new smartphone or building a new battery factory. So even the battery cell producers are asking: will production volumes scale up quickly?" Sommer said.
Currently, the company is restructuring 16 of its production facilities to generate capacity for production of electric vehicles. The company has announced plans of initiating production of electric cars under its various brands by middle of 2023 which would include brands like Skoda, Audi, VW and Seat.
The limited operating range of batteries and the long recharging times of batteries have prevented the mass acceptance of electric vehicles by consumers throughout the world. Another major deterrent is the lack of adequate infrastructure for charging of electric vehicles in most markets. This non-adoption of electric cars by consumers has been a cause of concern for potential battery suppliers for electric vehicles. 
"When it comes to normal components, suppliers have the opportunity to sell to other carmakers, if VW buys less. But with electromobility we all know: if it does not work for VW, then it won't work for others," Sommer said.
This is the reason that battery suppliers would be given finance by VW for tooling as well as sharing of the risks for installations of machines for increase of production capacity trough development of joint ventures with battery suppliers.
"The tendency is to do joint ventures. The suppliers are still asking themselves, is this market going to take off or not? Meanwhile they realize it is an opportunity," Sommer said.
The advantage of setting up joint ventures for VW is that it would allow the company to know early about progress being made in manufacturing for building of new plants. "We have built up our own expertise, which we share with suppliers, which helps when we build a new plant. It gives us an early indication if there are teething problems," Sommer said.
"We have not been able to build as many cars as we wanted to. Our supplier is not delivering the numbers that we need", he added.

Christopher J. Mitchell

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