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Volkswagen (OTC: VWAGY) on Monday it shared more parts of its plan to become the world’s biggest seller of electric vehicles (EVs) by the middle of the decade – specifically, the parts that explain where all the batteries will come from and where all these new electric VWs will be recharged. .
While much of what VW announced is focused on Europe, it will have global implications, not just for VW, but for all other companies already or planning to enter the EV space. That makes the news important to investors who hold EV stocks, especially small company stocks expecting big growth.
Let’s take a closer look.
VW battery roadmap: cut costs and improve performance
First, VW is working with partners to improve the performance and cost of the battery system down to the cell level. He plans to launch a new battery cell (which he calls the “unified cell”) in 2023 that will be used in up to 80% of the VW Group’s electric vehicles by 2030 (the rest will use a different premium battery cell in the future. near). term, and probably solid-state batteries later in the decade).
Over time, as economies of scale and other measures take hold (including recycling efforts), VW expects to reduce its battery costs by as much as 50% in entry-level segments and as much as 30% in high-volume mid-market segments for “significantly below” 100 euros ($ 119) per kilowatt hour. That’s low enough for VW’s electric vehicles to be profitable, and lower than many potential competitors are likely to achieve in the short term.
VW is already mass-producing ID.3 and ID.4 electric vehicles at its factory in Zwickau, Germany. Image source: Volkswagen.
Subsequently, VW hopes to introduce the solid-state battery cells that it is currently developing. QuantumScape (New York Stock Exchange: QS), a company in which VW has a significant investment. That battery is expected to further reduce recharge times and costs, while providing additional range.
VW to control huge battery cell manufacturing footprint in Europe
VW, together with its partners, plans to have six battery “gigafactories” in operation in Europe by 2030. Each of the six factories will have an annual production capacity of 40 gigawatt-hours (GWh), for a total of 240 GWh per anus.
The first two factories will be in Salzgitter, Germany and Skelleftea, Sweden. The Swedish factory will be built with partner Northvolt and will manufacture premium cells for the VW Group’s luxury vehicles. It is expected to start operations in 2023. The Salzgitter plant will produce the new unified cells in high volumes for VW’s mass market vehicles, starting in 2025.
VW is also investing in recharging
VW said it is also investing in a large-scale expansion of fast-charging networks in Europe, North America and China.
In Europe, together with its partners, it expects to operate some 18,000 fast charging points by 2025, compared to 3,600 today. (VW notes that it will be enough to meet about a third of the total expected demand in Europe in 2025).
Approximately 8,000 of those new points will consist of 150 kilowatt fast chargers installed at gas stations owned by BP (New York Stock Exchange: BP). The rest will be built by the Spanish power company Iberdrola; Italian gas and electricity supplier Enel Group; and by Ionity, a joint venture collection network established by VW and several other automakers in 2017.
The Ionity Charging Network is a joint venture funded by several automakers, including Volkswagen. Image source: Ionity.
In North America, VW said that Electrify America, the charging network created as part of VW’s $ 15.3 billion Dieselgate deal, will have about 3,500 fast-charging points up and running by the end of this year. And in China, VW plans a total of 17,000 fast-charging points by 2025 through an existing joint venture.
The Bottom Line: If You Expect Electric Vehicle Startups To “Disrupt” Car Manufacturing, Think Again
VW’s plan to take control of its battery supply chain and aggressively expand fast-charging networks is obviously inspired by Tesla‘s (NASDAQ: TSLA) Battery manufacturing strategies and charging networks. But for once, the key takeaways for EV investors aren’t just about Tesla.
VW is making it clear, as it has for some years now, that it plans to remain one of the world’s largest automakers as the world moves toward zero-emission vehicles. Specifically, its plans to control its battery supply and to drive the expansion of charging networks will limit opportunities for new and smaller players in the space, especially if other large automakers like General motors (New York Stock Exchange: GM) Y Toyota (NYSE: TM) do the same, as you almost certainly will.
Put another way, the idea that a small startup will disrupt the auto industry and take over a major chunk of the market no longer seems likely (if it ever was). For many of the new entrants, the option may be to soon partner with a large automaker, or to be crushed.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are variegated! Questioning an investment thesis, even one of our own, helps all of us think critically about investing and make decisions that help us be smarter, happier, and wealthier.
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