Power Play: Volkswagen cuts Korean cell supply chain

It looks like Volkswagen will not rely on its South Korean suppliers LG Chem, and SK Innovation for the planned new standard battery cell format announced at the Power Day this Monday.

According to Reuters, Volkswagen told its South Korean cell suppliers they would play no role in their future battery strategy only days before the Power Day, a Teslaesque event considered groundbreaking for the carmaker’s e-mobility strategy. The planned new battery cell will power 80 per cent of post-2025 electric vehicles across the Group.

The decision came as a shock to LG Chem and SK Innovation, sources close to the matter told the news agency. “It’s not our everyday business routine to get such one-sided notice from a partner … people seemed to be pretty alarmed,” one of the sources said. They also told Reuters that LG wanted to send an executive to Germany to discuss the potential battery switch – Volkswagen declined.

What exactly has caused this rift – which appears severe in the context of a key supplier relationship – is left open by Reuters. If anything, the reasons are manifold and include the dispute between LG and SK, threatening Volkswagen’s battery supply in the US.

There is also technology. The new cells Volkwagen wants to roll-out are prismatic, but both Korean battery suppliers focus on pouch cells. According to Reuters, Thomas Schmall, Volkswagen’s board member in charge of technology, said it would not be a big deal for battery suppliers to switch to the production of prismatic cells. Yet analysts suggested doing so would require significant reinvestment and time to overhaul factories.

SK said it currently has no plans to produce prismatic batteries, the news agency reports. LG, which makes prismatic batteries but only for smaller goods, declined to comment. Volkswagen was one of its biggest clients for pouch batteries, but it retains Tesla, General Motors and Hyundai.

For the remaining 20 per cent of battery cells that Volkswagen plans to source externally in the future, CATL, Wanxiang A123, Guoxuan High-tech and probably other companies from China remain in the run, Reuters has learned.

Lee Jae-il, an analyst at Eugene Investment & Securities, told the news agency, “Volkswagen’s announcement is just the beginning of the competition in the EV market, signalling that huge investment will be made competitively in the future.”

Volkswagen will be keeping more of its battery-making in house, it seems. At its Power Day event, the German carmaker not only announced plans to standardise its cell format (not the chemistry) but also to build six “Gigafactories” throughout Europe, both alone and with partners. So far, only Northvolt has been named. VW estimates they will need 240 GWh worth of cells by 2030.



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