The growing demand for power batteries and the rising price of new energy vehicles allow car companies to extend the control of the industrial chain to the source of battery manufacturing while deeply binding battery companies. On March 21, Volkswagen Group China (hereinafter referred to as "Volkswagen (China)") announced that it has signed two memorandums of understanding on strategic cooperation with Huayou Cobalt and Tsingshan Group to establish two joint ventures to lay out the supply chain of battery raw materials. In the field of new energy vehicles, batteries are both the core and the key to cost reduction, for Volkswagen in transition, stable battery supply is essential, so Volkswagen not only bound battery manufacturers but also began to invest in battery factories. However, with the rise in the price of battery raw materials, how to control costs has become a problem facing Volkswagen.
The joint venture involves upstream and downstream raw materials
According to the plan, Volkswagen (China) will set up a joint venture with Huayou Cobalt and Tsingshan Group in Indonesia, and the three parties will jointly invest their superior resources in the production of battery raw materials. It is expected that after full production, the total raw material capacity of the joint venture will be able to meet the supply of nickel and cobalt raw materials required for 160GWh batteries.
At the same time, Volkswagen (China) also plans to establish a joint venture with Huayou Cobalt, specializing in the refining of nickel and cobalt sulfates, precursor processing and cathode material production. Huayou Cobalt said that the company and Volkswagen (China) and Tsingshan Holdings have reached strategic cooperation intentions on the upstream and downstream cooperation of the power battery cathode material industry chain, and intend to jointly lay out the development of nickel and cobalt resources in Indonesia, as well as the integration of power battery cathode materials such as nickel and cobalt sulfate refining, precursor processing and cathode material production.
It is understood that Huayou Cobalt, founded in 2002, is mainly engaged in the research and development and manufacture of new energy lithium battery materials and cobalt new materials, and the main products are lithium battery cathode material precursors, cobalt chemicals and copper-nickel metals. Tsingshan Group is the world's largest integrated industry from laterite nickel ore to nickel iron and stainless steel, known as the "Chinese nickel king". At present, the group has five major groups such as Qingshan Holding Group Co., Ltd., Shanghai Dingxin Investment (Group) Co., Ltd., and Qingtuo Group Co., Ltd.
For this cooperation, Volkswagen (China) said that it will further consolidate its position in the domestic battery value chain and strengthen its competitiveness in the fast-growing field of electric mobility. The cooperation aims to achieve cost advantages, ensure the supply of raw materials, achieve a transparent and sustainable supply chain, and strengthen technological innovation synergy in the whole industry chain, including precursors and cathode materials.
Escorting the "2030 Strategy"
"Batteries are the core competitiveness of the future", this is volkswagen's judgment on future competition. Joining hands with upstream companies to enter the battery raw materials will further ensure the stability of Volkswagen's core competitiveness in the transformation.
When Volkswagen unveiled its Strategy 2030 last July, Herbert Diess, chairman of the Volkswagen Group's board of management, said that it expected Volkswagen's electric vehicle sales to account for 50 percent of its total sales by 2030, up from just 3 percent last year. For the crucial Chinese market, Volkswagen aims to increase its share of China's new energy vehicle market to the same share as the fuel vehicle market by 2030.
Behind the high growth goal, how to better ensure the supply of batteries has become a problem for Volkswagen. In the "2030 Strategy", Volkswagen believes that "electricity" will become the core competitiveness in 2030, and "battery cells and systems" and "charging and energy" will also become the two pillars under Volkswagen's new technology division. To this end, Volkswagen is increasing its battery-related competitiveness and reducing the complexity of its production processes, while introducing standard batteries that are used in approximately 80 percent of the electric vehicles of the Group's brands.
According to the plan, by 2030, Volkswagen will work with partners to build six super battery plants in Europe with a total capacity of 240 GWh per year, and the first two plants will be located in Skelleft o, Sweden, and Salzgitter, Germany. In the Chinese market, Volkswagen cooperated with CATL at the same time, invested heavily in Guoxuan Hi-Tech, and became the controlling shareholder of the latter, deeply binding battery suppliers. According to Volkswagen's plan, it will work with Guoxuan Hi-Tech to establish a new battery production center in Salzgitter, covering a battery technology center, a battery test laboratory, a battery pilot production line and a battery recycling pilot plant, laying the foundation for a battery cell factory for mass production in 2025.
Yan Jinghui, a member of the expert committee of the China Circulation Association, believes that for car companies, the core of the field of new energy vehicles is the battery. However, external procurement needs to rely on suppliers, and the layout of the raw material side of Volkswagen (China) will further create a closed-loop supply chain.
Pre-relieving cost pressures
Whether it is batteries or raw materials, Volkswagen's fundamental change from "take-ism" to "self-sufficiency" still comes from cost pressure.
To meet the requirements of the EU Green Deal, Volkswagen's share of electrified vehicles needs to rise from 30% to 60%. This means that Volkswagen needs more batteries, and controlling battery costs has become key to ensuring corporate profits. Volkswagen predicts that by 2030, in all mass-produced models, the overall cost of the battery will be reduced by 30%, of which the battery cost will be reduced by up to 50% on the entry-level model, and in order to achieve the cost reduction goal, Volkswagen began to seek the possibility of battery research and development.
However, it is not only technology that drives up costs, but also from the rise in raw material prices caused by tight resources. Since the beginning of this year, the prices of lithium, cobalt and nickel have continued to rise, making battery prices rise by about 18%. According to the data, the price of battery-grade lithium carbonate rose to 9,000 yuan / ton in February this year, with an average price of 454,000 yuan / ton; the price of lithium hydroxide rose by 8500-10,000 yuan / ton; the price of lithium iron phosphate rose by 2500 yuan / ton. Goldman Sachs analysts said that if the price of nickel reaches the historical price of $50,000 per ton, the price of each electric vehicle could rise by $1250-1500.
Due to the rise in raw material prices, key raw materials such as lithium, cobalt and nickel have become the focus of the layout of major battery manufacturers. It is reported that Indonesia is the country with the largest nickel reserves in the world, with a production of up to 1 million tons in 2021, accounting for 37.04% of global production. However, Indonesia will ban the export of nickel ore from 2020, and it is reported that manufacturers such as CATL and LG Chem will build factories in Indonesia. Volkswagen (China) said that the cooperation with the two companies will help achieve the long-term goal of reducing the cost of batteries by 30%-50% of the group, while continuously improving key performances such as energy density of power batteries through technological collaboration.
Beijing Business Daily reporter Liu Yang liu xiaomeng
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