Volkswagen (VOWG_p.DE) is optimistic that there are sufficient funds, internal or external, to pull off its ambitious plan to build six large battery factories across Europe with partners by the end of the decade, its chief executive said.
“The required capital is available in the market. Northvolt has shown this,” Herbert Diess said on the sidelines of the IAA Munich car show.
Swedish battery cell maker Northvolt, in which Volkswagen owns a 20% stake, raised $2.8 billion in June in one of the biggest private placements in Europe this year that was led by four Swedish pension fund and OMERS Capital Markets.
“Today, the returns that can be earned with battery production are high. It is a demand-driven market and stays a demand-driven market for the foreseeable future,” Diess said.
Building new battery cell plants, which usually cost around 2 billion euros ($2.4 billion) apiece, are a key requirement for Volkswagen’s vision to become the world’s leaders in electric vehicles (EV).
Volkswagen in March outlined its battery cell push, which it plans to pull off with partners, but has so far not specified exactly how much it will cost and what share the carmaker plans to fund on its own.
The six European factories will have joint production capacity of up to 240 gigawatt hours (GWh) a year, with the first 40 GWh coming from Northvolt from 2023.
The second plant will be built in the city of Salzgitter by 2025 in partnership with China’s Gotion High-Tech (002074.SZ), in which Volkswagen owns a 26% stake, with Spain and eastern Europe possible locations for a third and fourth plant.
Two more plants are to be built in subsequent years but Volkswagen has not specified where in Europe they will be located.
Diess in May said that parts of Volkswagen’s battery activities could be separately listed in an initial public offering.