VW Says Battery Supply Problems Have Been Solved… for a While
Following rumors that Audi’s E-Tron would have to be delayed due to issues with battery supplier LG Chem and some unforeseen “software development” problems, Volkswagen Group’s plan to build 330,000 electric vehicles per year in Zwickau, Germany, by 2021 appeared to possess a plot hole the size of the Grand Canyon.
The EV problem is not unique to Volkswagen. Other manufacturers hoping to build electric cars have also been struggling with factory retooling, high development costs, and in-demand battery suppliers that are more than willing to change their prices. However VW claims to have solved some of these issues, at least for a while, citing new investments in China and multiple partnerships with battery concerns.
“I can confirm that for the first years of our plan, a sufficient supply of cells has been contractually secured,” Thomas Ulbrich, VW brand management board member in charge of electric mobility, explained to Automotive News Europe this week.
He followed by saying he was unconcerned with rumors suggesting suppliers may cancel contracts following Volkswagen’s decision to invest 1 billion euros into a battery cell plant in Salzgitter, Germany, with partner Northvolt. “They probably hoped to maintain an oligopoly for a very long time,” Ulbirch said. “We have the contracts so no one is going to stand there and tell us ‘we are not going to supply you any more, help yourselves if you want to build them anyway,’ — that’s not possible.”
The automaker has selected LG Chem, Samsung and SK Innovation as battery suppliers for Europe, along with Contemporary Amperex Technology for China. SK Innovation is scheduled to become a partner in North America in 2022. Using their combined might, VW thinks it can hit production targets without breaking much of a sweat.
That might not help in the very short term, however. According to internal documents referenced by Belgian newspaper L’Echo, Audi is believed to have reduced its outlook for the E-Tron this year by nearly 10,000 units. While that’s largely due to the initial product delay, concerns remain about VW’s overall battery supply — especially as those “mainstream” ID-branded models approach their own launch dates.
Audi is believed to have similarly delayed the launch of the new E-Tron Sportback. Originally expected to go on sale before the end of 2019, deliveries of the crossover are now tentatively scheduled for early 2020. The ID3/Neo begins assembly this year, with sales expected to commence before next summer.
As automakers need less of a bandaid and more of a suture with lots of gauze to cope with these introductory EVs’ supply problems, VW is trying to confront things directly and be more transparent regarding the future complications which will undoubtedly manifest. The automaker’s latest plan incorporates building two new Chinese facilities (operating at a 600,000-unit capacity), utilizing the brand’s MEB platform to help bolster EV production. The company expects it will need more than 300 gigawatt hours (GWh) of battery supply just to cover Europe and Asia in 2025. That’s absolutely impossible without major commitments from multiple battery suppliers and borderline crazy without a customer base ready to scoop up those vehicles.
From Automotive News:
VW is making changes to its battery-purchasing plan over concerns that supply deal with Samsung, might unravel, Bloomberg reported in May. VW could now only source fewer than 5 gigawatt hours of cells from Samsung SDI rather than the 20 GWh initially planned, sources told Bloomberg.
Ulbrich did not deny the Samsung report, saying that the automaker is and will be looking for future supply to cover its growing demand.
“Our procurement needs continue after that [first wave] however,” he said. “You will likely see us permanently in negotiations for cells for the next three to five years.”
Undoubtedly. But good luck finding a reliable way to source 300 gigawatt hours by 2025, Volkswagen. You are definitely going to need it.
[Image: Volkswagen Group]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Another European "Tesla-killer" is going down the drain.
Frankly, I'm perversely almost looking forward to one fallout from Trump's coming insane war with Iran. This could be the last "oil war" (people don't think it's about anything else, do they?). It would cause immediate world oil shortages and prices through the roof. Maybe, $6.0/gallon or more - if you can find it. This has the potential to create a tipping point where many people say, screw it, I'm done with ICE vehicles. It'll be fascinating to watch various manufacturers struggling to get newly-in-high-demand electrics to market, let alone all the ancillary business like solar roofs and storage batteries for home charging. That's the only way this can roll out quickly (over 5 - 10 years)on a vast scale. Distributed power generation and storage will be needed as electric grids will prove inadequate for the task. And, incidentally, getting off ICEs is also absolutely needed, over the same frame, if we are to avoid climate catastrophe. But hey, the upside is a major boost to the economy with new jobs and business opportunities galore, similar to the effect when the country originally electrified over a century ago. We're living in interesting times and they're about to get a lot more so.