VW, PowerCo and Umicore form joint venture for European battery materials supply chain

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There are a number of reasons for battery constraints, including limited access to key materials, low manufacturing yields, and growing demand for batteries from multiple industries. And that’s not going to subside anytime soon. As the world continues to move towards electric vehicles, demand for batteries will exceed supply for years to come.

Why years? Because setting up new mining, refining facilities and battery production facilities cannot happen overnight. Commissioning a new mine is particularly difficult and time consuming. Thus, agreements must be made years in advance to ensure that an automaker has sufficient supply to meet its electric vehicle manufacturing needs.

We continue to report on the battery deals that manufacturers are making for battery production, minerals and other components, because it’s going to make the difference between adopting electric vehicles or having to other things because there is not enough battery for everyone.

VW’s new offering for recycled battery materials

From 2025, the joint venture between PowerCo, the new battery business of the Volkswagen Group, and Umicore, the Belgian circular materials technology company, will start producing precursor and cathode materials in Europe. The partnership will supply European battery cell manufacturers with key chemicals supplied by PowerCo.

The partners’ objective by the end of the decade is to produce cathode materials and their precursors for a cell capacity of 160 GWh per year. This compares to an annual production capacity that could power around 2.2 million fully electric vehicles. Cathode active materials are crucial for a successful powertrain transition to e-mobility, as they are key levers affecting battery performance, as well as the largest contributor to overall battery cost.

“Cathode material is an indispensable strategic resource for battery production, accounting for approximately fifty percent of the overall cell value.” said Thomas Schmall, group board member for technology at Volkswagen AG and chairman of the supervisory board of PowerCo SE. “Immediate and long-term access to extended capacities is therefore a very clear competitive advantage. We are building a sustainable and transparent supply chain with high environmental and social standards, locating value creation here in Europe.

The long-term strategic relationship is focused on the European production of precursor and cathode materials, which are important input materials that contribute to the value creation of batteries. Under the terms of other agreements, Umicore and PowerCo will collaborate on the sustainable and responsible sourcing of raw materials, where Umicore is a market leader. Umicore will also offer PowerCo refining services. And, using Umicore’s technology and expertise, the two companies plan to add battery recycling to the joint venture at a later stage.

The JV is expected to start production in 2025 to supply PowerCo’s Salzgitter plant and has an annual capacity of 40 GWh. The objective for the two partners is to increase the annual production rate of the JV by 2030 so that it reaches 160 GWh, everything depends on the evolution of the market. The search for a suitable location for the plant site is still ongoing.

“This partnership is a strong signal of recognition of our product and process expertise and a testament to the success of our strategy to establish closed-loop industrial-scale sustainable value chains for battery materials in key regions.” said Mathias Miedreich, CEO of Umicore. “We accompany our customers on their path to electrification from the start, and we are very happy to partner with PowerCo and support Volkswagen in its rapid transformation towards sustainable electric mobility.”

Under the terms of the partnership, both parties will have a say in the management of the joint venture and will share expenses, investments, profits and benefits equally. The two partners predict that the electric mobility market in Europe will become increasingly competitive in the coming years thanks to their joint investment of three billion euros in new materials manufacturing capacities.

PowerCo and Umicore have entered into a collaboration that will provide the company with secure and cost-effective access to Umicore’s state-of-the-art, sustainably-sourced and customized high-performance battery materials for its unified cell approach in Europe. This will allow PowerCo to benefit from Umicore’s established production capabilities as well as upstream knowledge. In return, it will provide secure access to a significant part of the European demand for cathode materials for electric vehicles at creative yields with assured value for Umicore.

The joint venture is intended to satisfy the profit and return requirements of both partners, enabling them to unlock significant synergies and economies of scale for each party. In order to maintain its position as a technological leader, Umicore’s intellectual property and expertise will be licensed to the JV through a license agreement.

“We are constantly getting into the holistic value creation of the battery. A battery material supplier industry on the scale required does not yet exist today. said Jörg Teichmann, Purchasing Director of PowerCo. “We are changing that through our long-term cooperation with Umicore as the global market leader in key materials used in cell production.”

PowerCo said battery cell availability, cost and technical performance are key requirements for a successful scaling up of e-mobility. By developing significant production capacities, we will be able to meet the growing demand for these materials from our main customer Volkswagen AG in terms of volume and at an optimal cost.

The deal is still subject to regulatory approval and other closing conditions. The name of the joint venture has not yet been chosen, but will be announced at a later date.

why it matters

One of the main criticisms of electric vehicles is that the battery materials come from sources that are not environmentally friendly and sometimes unethical. This partnership is a strong signal that the electric vehicle industry is committed to changing that. Not only will the joint venture use Umicore’s state-of-the-art sustainably sourced battery materials, but it plans to add battery recycling to the mix at a later stage. This will help close the loop on EV battery materials and make the industry more sustainable in the long run.

It’s also a sign that the EV industry is beginning to mature. Volkswagen is the largest car manufacturer in the world and Umicore is one of the main suppliers of battery materials. That this maturation incorporates recycling and practices that are more respectful of the environment is a great development.

Feature image: PowerCo and Umicore set up a joint venture for the European production of battery materials (left to right: Thomas Schmall, Group Board Member for Technology at Volkswagen AG and Chairman of the Supervisory Board of PowerCo SE , Jörg Teichmann, Purchasing Director of PowerCo, Ralph Kiessling, EVP Energy & Surface Technologies at Umicore, Umicore CEO Mathias Miedreich). Image courtesy of Volkswagen.


 

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