World's 3rd largest battery firm may ally with VW for electric cars in China


Volkswagen ID Crozz II concept, 2017 Frankfurt auto show

Volkswagen ID Crozz II concept, 2017 Frankfurt auto show

Enlarge Photo

Many automakers have announced they will electrify entire vehicle portfolios in the years to come. With more electrified cars on the road, battery production will become increasingly more important.

Adding to the positive outlook for lithium-ion cell makers is Volkswagen's potential partnership with CATL (Contemporary Amperex Technology Company Ltd.), the world's third-largest battery firm.

In overall battery deliveries, CATL ranks behind only Panasonic and BYD, the Chinese firm that builds both cells and the cars they power.

DON'T MISS: VW says it needs '40 gigafactories' for electric-car batteries by 2025

Volkswagen is in the process of selecting one or more allies to supply batteries for its lineup of electric cars in the future—and China is of the utmost importance.

Many of the country's battery firms are eager to clinch business from Volkswagen, and for good reason: The contract's value may total $60 billion in the future, according to Caixin.

Specifically, the chosen company will supply batteries for many Volkswagen vehicles built on the MEB platform, the huge automaker's dedicated electric-car architecture.

Volkswagen ID Buzz Concept

Volkswagen ID Buzz Concept

Enlarge Photo

Awarding the business to a Chinese firm would further cement the country as a legitimate rival to Japanese and South Korean companies.

China plans to build many battery plants, often described as many gigafactories' worth (1 gigawatt-hour is equal to 1 million kilowatt-hours).

The battery industry's total value will likely surpass $200 billion in the near future, and China has long had as official policy to become the world's battery-production capital.

READ THIS: China to build many gigafactories' worth of electric-car battery plants

In 2016, it started to exclude foreign companies from the list of licensed battery suppliers among whom automakers must choose to qualify for new-energy-vehicle subsidy programs.

China also announced aggressive electric-car rules last month, which will go into effect remarkably soon, in 2019.

Those electric-car production quotas will effectively change how automakers approach electrification in the world's largest car-buying market.

Volkswagen ID electric car concept, 2016 Paris auto show

Volkswagen ID electric car concept, 2016 Paris auto show

Enlarge Photo

Meanwhile, Volkswagen will rely heavily on China to grow its electrified-vehicle portfolio.

The automaker plans to sell 1 million electric cars annually by 2025—and China will likely be the largest single piece of that volume.

In a leaked product roadmap, VW plans indicate that at least three of its upcoming electric cars are to be sold in China.

CHECK OUT: China electric-car rules to start in 2019; aggressive totals are world's highest

Those are the ID Cross, ID Lounge, and ID AEROe—although VW so far hasn't shown the latter two.

Volkswagen's electric-car production target will require 150 gigawatt-hours worth of lithium-ion batteries each year.

And as of now, China looks poised to take what could be the largest part of the German automaker's battery needs.

[Hat tip: Michael Dunne]

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