Volkswagen constructing first in-house battery plant in Europe, considering 'big moves' in China
Peng Chen, DIGITIMES, Taipei
Tuesday 12 July 2022

Volkswagen Group broke ground on its first of six battery plants in Europe last week, marking progress in vertical integration. Moreover, the automaker has been expanding the software team in China as one way to fulfill its ambition. CEO Herbert Diess said that the company is considering "big moves" in the country.

With the presence of German Chancellor Olaf Scholz, Volkswagen started constructing its first in-house cell factory in Salzgitter, Germany, on July 7. The production of prismatic unified cells for up to 80% of the carmaker's models will begin in 2025. The plant will reach an annual capacity of 40 GWh in the future.

Volkswagen has said it plans to build six battery plants throughout Europe with a total volume of 240 GWh. According to a press release, the next cell factory will be established in Valencia, Spain. In addition, the company is exploring the possibility of Gigafactories set up in North America.

The largest automaker in Europe has incorporated a new company, PowerCo, to handle its global battery businesses. The battery company is in charge of international factory operations, cell technology development, the vertical integration of the value chain and machinery and equipment supply. In addition, it has planned products like major storage systems for the energy grid.

In a press release, Thomas Schmall, Volkswagen management board member and PowerCo's supervisory board chairman, said PowerCo's major strength would be vertical integration from raw materials, the cell to recycling.

Up to 2030, the battery company prepares to invest more than EUR20 billion (US$20 billion) with partners to develop the business. The goal is to create annual sales exceeding EUR20 billion and employ about 20,000 people in Europe.

China expansion
Besides Europe, Volkswagen is on track to increase its influence in China's car market. Present in a recent video with Chan Qing, CEO of Cariad China, Diess said the carmaker will make significant investments in China and employ several thousand software professionals in a few years. Cariad is Volkswagen's automotive software and technology company founded in 2020.

Diess added that Volkswagen needs to catch up with competitors in China. They move fast, especially in developing driver assistance systems toward autonomous driving and enhancing in-car user experience.

The CEO said the user experience in China is different and more sophisticated compared with other countries. Customers expect much more integrated and digital assistance. For example, karaoke and sophisticated loudspeaker system are demanded. People also need inside cameras to take pictures or live stream.

As a result, Cariad is creating a local software team to improve the in-car user experience and level up advanced driver assistance systems (ADAS). Diess said Volkswagen concluded years ago that it has to develop the technologies in China for China.

While the company has been building up resources in the world's largest car market, Dies said hiring people from other companies is not enough. Volkswagen is considering "big moves" in China. He did not provide details.

The CEO's remarks echoed Cariad's announcement in April about its China subsidiary. It was the first one outside Europe. Cariad has been building a unified software platform and tech stack for all Volkswagen brands, according to its website. The tech stack is scheduled to launch by the middle of the decade, with Level 4 vehicle autonomy ready.

The team in China will develop China-specific software products, including ADAS and automated driving, next-generation connectivity, intelligent cockpit and body concepts, big data, and operating systems.

The company also said it would double the team of 600 in China by the end of 2023, with 90% of local talents. Additionally, it is establishing a nationwide R&D network, earmarking Beijing, Shanghai, Chengdu and Hefei as initial hub locations.

Volkswagen has shown its ambition in China. In late June, it held the world premiere of the ID. AERO concept car in China. It was the brand's first global fully-electric sedan.

According to the automaker, the vehicle could offer a range of more than 600 kilometers. The production version for China is likely to go on sale in the second half of 2023, with production beginning in Europe in the same year.