Volkswagen signs a battery contract worth $14 billion with Northvolt

As yet another sign that Volkswagen is taking its foray into electric mobility seriously, the auto giant has placed an extraordinary order for batteries worth $14 billion. The supplier is Northvolt, a Swedish battery manufacturer. The deal will also see the German vehicle manufacturer increasing its ownership share in Northvolt.

The contract, which will last for ten years, will make Northvolt the major supplier of battery to Volkswagen for its Europe operations.

This deal was announced a day before Volkwagen’s Power Day event, where the company details its future plans for electric mobility. Volkswagen is hoping to cut down on battery costs and at the same time reduce the environmental impact of its battery supply chain as it continues to expand its electric vehicle offering.

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“We aim to reduce the cost and complexity of the battery and at the same time increase its range and performance,” Volkswagen Group Components CEO Thomas Schmall said during Power Day. “On average, we will drive down the cost of battery systems to significantly below 100 euro (US$119) per kilowatt hour. This will finally make e-mobility affordable and the dominant drive technology”

On its own Northvolt is fast becoming a force to reckon with in the battery tech space in Europe. It has managed to secure more than $27 billion worth of contracts as companies try to cut down cost through high volume purchases.

The company is dedicated to building the most eco-friendly batteries for the automotive industry. It has also announced its aim to achieve carbon neutrality in all its operations as it seeks to expand its reach.

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Volkswagen has been on an upward trajectory in electric vehicles sales, delivering 231,600 BEVs in 2020, which was more than three times the figure for 2019. The reduction in battery costs through economy of scale will only help the German company sell more affordable electric vehicles. The company has plans to introduce more than 70 BEVs by 2029.

Even with this enormous contract, Volkswagen still sees itself as a battery manufacturer, having agreed to purchase Northvolt’s share in a Salzgitter battery manufacturing plant in Germany. It wants to achieve 240 GWh of battery production in Europe.

Commenting on the deal, Northvolt CEO Peter Carlsson said “Volkswagen is a key investor, customer, and partner on the journey ahead and we will continue to work hard with the goal to provide them with the greenest battery on the planet as they rapidly expand their fleet of electric vehicles.”