VW Says Battery Supply Problems Have Been Solved… for a While

Following rumors that Audi’s E-Tron would have to be delayed due to issues with battery supplier LG Chem and some unforeseen “software development” problems, Volkswagen Group’s plan to build 330,000 electric vehicles per year in Zwickau, Germany, by 2021 appeared to possess a plot hole the size of the Grand Canyon.

The EV problem is not unique to Volkswagen. Other manufacturers hoping to build electric cars have also been struggling with factory retooling, high development costs, and in-demand battery suppliers that are more than willing to change their prices. However, VW claims to have solved some of these issues, at least for a while, citing new investments in China and multiple partnerships with battery concerns.

“I can confirm that for the first years of our plan, a sufficient supply of cells has been contractually secured,” Thomas Ulbrich, VW brand management board member in charge of electric mobility, explained to Automotive News Europe this week.

He followed by saying he was unconcerned with rumors suggesting suppliers may cancel contracts following Volkswagen’s decision to invest 1 billion euros into a battery cell plant in Salzgitter, Germany, with partner Northvolt. “They probably hoped to maintain an oligopoly for a very long time,” Ulbirch said. “We have the contracts so no one is going to stand there and tell us ‘we are not going to supply you any more, help yourselves if you want to build them anyway,’ — that’s not possible.”

The automaker has selected LG Chem, Samsung, and SK Innovation as battery suppliers for Europe, along with Contemporary Amperex Technology for China. SK Innovation is scheduled to become a partner in North America in 2022. Using their combined might, VW thinks it can hit production targets without breaking much of a sweat.

That might not help in the very short term, however. According to internal documents referenced by Belgian newspaper L’Echo, Audi is believed to have reduced its outlook for the E-Tron this year by nearly 10,000 units. While that’s largely due to the initial product delay, concerns remain about VW’s overall battery supply — especially as those “mainstream” ID-branded models approach their own launch dates.

Audi is believed to have similarly delayed the launch of the new E-Tron Sportback. Originally expected to go on sale before the end of 2019, deliveries of the crossover are now tentatively scheduled for early 2020. The ID3/Neo begins assembly this year, with sales expected to commence before next summer.

As automakers need less of a bandaid and more of a future with lots of gauze to cope with these introductory EVs’ supply problems, VW is trying to confront things directly and be more transparent regarding the future complications which will undoubtedly manifest. The automaker’s latest plan incorporates building two new Chinese facilities (operating at a 600,000-unit capacity), utilizing the brand’s MEB platform to help bolster EV production. The company expects it will need more than 300-gigawatt hours (GWh) of battery supply just to cover Europe and Asia in 2025. That’s absolutely impossible without major commitments from multiple battery suppliers and borderline crazy without a customer base ready to scoop up those vehicles.

From Automotive News:

VW is making changes to its battery-purchasing plan over concerns that supply deal with Samsung, might unravel, Bloomberg reported in May. VW could now only source fewer than 5 gigawatt hours of cells from Samsung SDI rather than the 20 GWh initially planned, sources told Bloomberg.

Ulbrich did not deny the Samsung report, saying that the automaker is and will be looking for future supply to cover its growing demand.

“Our procurement needs continue after that [first wave] however,” he said. “You will likely see us permanently in negotiations for cells for the next three to five years.”

Undoubtedly. But good luck finding a reliable way to source 300-gigawatt hours by 2025, Volkswagen. You are definitely going to need it.

a version of this article first appeared on TTAC