VW is reportedly going to build its own battery cell gigafactory

Volkswagen is currently trying to figure out a way to secure large quantities of battery cells to support its critical electric vehicle ambitions.

After previously ruling out manufacturing its own battery cell, the German automaker is now reportedly going to build its own battery cell gigafactory (a battery factory with an output in the GWh) in partnership with SK Innovation.

Back in 2016, VW launched a new commitment to electric vehicles as they slowly started to distance themselves from diesel following the Dieselgate scandal.

With a goal to make 3 million electric vehicles per year between all their brands (VW, Audi, Porsche, etc.) by 2025, they considered making their own battery cells in order to support the extremely high production rate, but they ended up abandoning those plans.

Instead, they issued battery supply contracts worth $48 billion with existing battery manufacturers.

But earlier this year, VW CEO Herbert Diess said that he doesn’t want to become dependent on those manufacturers:

“We must not make ourselves dependent on a few Asian manufacturers in the long term,”

At the time, Diess only admitted that it would make sense to bring some battery cell production in-house for the next-generation battery production, namely solid-state batteries, in 2025.

Now Diess is reportedly leading a different effort for VW to have its own battery cell production.

According to Germany’s Manager Magazin, Volkswagen is in negotiations with SK Innovation, a Korean battery cell manufacturer, to partner up on a gigafactory in Europe.

The new partnership would add to the already billions of worth of battery cell supply contracts that VW has with other suppliers like LG Chem and Samsung SDI.

During the conference call for Tesla’s third quarter financial results yesterday, CEO Elon Musk said that one of Tesla’s biggest competitive advantages is their investment in Gigafactory 1.

He even encouraged other automakers to do the same:

“So, I do encourage our competitors to really make a huge investment and we’ve been saying that for a long time.”

By making a deal to build a giant factory with gigawatt-hours of annual capacity with an establish battery cell manufacturer like SK Innovation, it would certainly be reminiscent of Tesla’s own deal with Panasonic for Gigafactory 1 in Nevada.

The German automaker itself admitted there’s a need for 40 Gigafactory-size battery factories by 2025.

For now, nothing is concrete and the companies are still in negotiation.

In the meantime, VW is also running a ‘task force’ with battery supplier LG to assure supply for its upcoming EV production ramp up.