German automaker Volkswagen has announced securing $25bn in battery supplies as part of an aggressive push into the electric vehicle market.
The company is set to produce 3 million cars a year from 16 factories dedicated to EVs. This is a dramatic increase on the 3 plants it currently uses for the purpose.
Suppliers include Samsung SDI Co., LG Chem Ltd. and Contemporary Amperex Technology Ltd. for batteries in Europe and China.
With the powerpack deliveries secured for its two biggest markets, a deal for North America will follow shortly, Volkswagen said on Tuesday. In total, the car maker has said it plans to purchase about EUR50bn in batteries as part of its electric-car push, which includes three new models in 2018 with dozens more following.
Bloomberg reports that the move represents a threat to Tesla, who had $17.5bn worth of purchase obligations as of last year, including $15.4bn in deals through 2022, primarily related to buying lithium-ion cells from Panasonic, according to a recent filing.
As of next year, the 12-brand group will roll out a new battery-powered model “virtually every month,” Chief Executive Officer Matthias Mueller said at the company’s annual press conference. “This is how we intend to offer the largest fleet of electric vehicles in the world.”
VW also announced that it will be setting up a standalone sub-brand for battery-powered vehicles. The first model with the I.D. nameplate will be the Neo hatchback that goes on sale in 2020. The Audi luxury marque is set to begin deliveries later this year of the all-electric E-Tron SUV.
Despite the boldness of the plans, some potential hitches remain. The company, which has struggled to secure sources of cobalt, a critical component for modern batteries, said that it’s working on ways to reduce the amount of the element needed for its electric cars, suggesting ongoing concerns even after setting up supplies for its initial electric-car rollout.
The automaker has enough cobalt for those vehicles, but access to the metal remains a long-term issue industrywide, Chief Financial Officer Frank Witter told Bloomberg TV.