Volkswagen announced in December 2021 that they are consolidating battery-related activities into a new European battery company. This entire new value chain is expected to grow as the electric vehicle market increases. Eventually leading to a new subsidiary division, supplying batteries to other companies as well.
The news comes along as a Volkswagen board member hints about an IPO. It’s envisioned to cover all aspects of the EV batteries, including cell production with six battery Gigafactories by 2030 with a total output of 240 GWh/year. According to the latest news, at some point, the German company might list the new company in an initial public offering (IPO) and end up owning only a minority stake (the majority of shares would be sold to external investors).
Such a possibility was hinted at by Thomas Schmall – Member of the Board of Management Volkswagen AG and CEO of Volkswagen Group Components – according to Frankfurter Allgemeine Sonntagszeitung newspaper, “If unit sales of electric vehicles grow the way we expect it would make sense to bring on board, external investors. But we want to remain at the steering wheel. For that one does not necessarily need the majority.”
Supplying to other automakers
In other words, Volkswagen’s in-house battery division (maybe with some plant joint ventures) will operate as a subsidiary, but in the future, it might become a satellite supplier. In the long-term, the battery company is expected to supply batteries also for other manufacturers. Stated, “We want to set a standard for our industry.” Theoretically, Volkswagen could maintain control over the battery division even with a minority stake (through shares with higher voting power). Anyway, it’s quite surprising, because we thought that the direction is to take batteries entirely in-house.
Usually, the automaker’s subsidiary tends to supply to the automaker only. Despite the increased capacity, the capacity of the automakers is also expected to increase in the coming years. Automakers are specific about their batteries as that is what determines the range and features of the vehicle. Battery suppliers like CATL and LG Chem work with each automaker individually for specific needs as per the vehicles. However, it could be possible that Volkswagen subsidiary supplies to relatively smaller production automakers.
More IPOs are expected from other battery makers like LG Chem and SK Innovation. As they become separate entities, their supply to large automakers continues. Especially as new battery technology is being worked on, more innovations are predicted.