Volkswagen finds itself having to pressure battery suppliers to commit to electric cars

Volkswagen has long-term contracts with a number of battery suppliers as the company starts its massive push into electric cars, but it’s finding those suppliers need a little extra convincing when it comes to the potential of manufacturing batteries for its EVs.

VW has identified a need to create joint ventures and offer financial help to its battery suppliers as it moves forward. As Volkswagen board member Stefan Sommer told Reuters,

“Not every supplier is convinced that electric mobility will come on such a large scale. You need to spend more time convincing them to invest in the auto industry.”

While the carmaker announced just a few weeks ago that it has secured the necessary contracts for the first few years of its production ramp-up, it hasn’t been smooth sailing with all of its partners.

Supplier LG Chem reportedly threatened to cut its battery supply to VW over its proposed gigafactory plans with an other supplier, SK Innovation. LG Chem later sued SK Innovation over the alleged theft of battery trade secrets.

VW has also run into issues with supplier Samsung, which apparently can’t deliver on most of its promised supply. As Sommer said to Reuters,

“These producers need to prioritize between making a new smartphone or building a new battery factory. So even the battery cell producers are asking: will production volumes scale up quickly?”

Last month, VW announced a venture with Northvolt for a joint gigafactory — the carmaker is also investing in Northvolt’s own gigafactory.

The Reuters article has a few other interesting quotes from Sommer when it comes to the challenges of VW securing its necessary battery supply. As of last year, the company awarded $48 billion in battery contracts. He said:

“When it comes to normal components, suppliers have the opportunity to sell to other car makers, if VW buys less. But with electromobility we all know: if it does not work for VW, then it won’t work for others.”

He also said, “We have not been able to build as many cars as we wanted to. Our supplier is not delivering the numbers that we need.” But it’s unclear who he was referring to in this case — whether it was Samsung, or others.

Volkswagen is also expected to announce a deal with Ford any day now on electric and self-driving cars. The deal was considered to be virtually guaranteed as of mid-June, with another recent Reuters report claiming an outline agreement has been reached.