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The photo shows the logo of Volkswagen. (provided Volkswagen AG)

“We will make the battery a core business of Volkswagen,” Volkswagen Group Components CEO Thomas Schmall recently said. But can the German automaker’s declaration become a reality?

Following the lead of the US automaker Tesla, the VW Group is embarking on its own transformation into a “battery business.” With the two companies already battling it out for the top two positions in the electric vehicle (EV) market, the plan is expected to have major repercussions for the battery industry.

For this reason, attention is now focusing on how successful the group will be with its battery internalization push. Also attracting notice is Northvolt, the Swedish battery manufacturer that holds the key to that success.

The VW Group announced its plans for independent battery production at a “Power Day” event Monday. They center around speeding up its battery internalization efforts, while integrating 80% of its portfolio with the same prismatic battery design.

The aim is to cut costs through greater economies of scale. To this end, the group plans to establish its own facilities with a total capacity of 240 gigawatt hours in battery cell production in Europe by 2030.

Joerg Teichmann, chief purchasing officer for Volkswagen Group Components, explained that batteries are key to leadership in e-mobility, while vertical integration is key to establishing cost-competitiveness. His remarks read along similar lines as those made by Tesla CEO Elon Musk during a “Battery Day” event last September, where he declared that Tesla would become the top company in battery manufacturing.

The industry response has been anxious.

According to figures from the US website EV Sales, the 13.5% market share for the VW Group’s plug-in EVs last year put it in second place behind Tesla (16.0%). If the VW Group also succeeds in internalizing battery production, that poses a threat not only to battery businesses, but also to the finished automobile industry.

Northvolt will be key to whether the VW Group’s strategy succeeds. The Swedish company is to be directly or indirectly involved in at least a third of the group’s European production volumes.

This means that the group’s battery internalization push is dependent in large part on the competitiveness of Northvolt’s technology. Schmall said Monday the VW Group would be strengthening its relationship with Northvolt for the purposes of battery mass production.

Just how advanced Northvolt’s technology is remains shrouded in mystery. Founded in 2016 by former Tesla executive Peter Carlsson, Northvolt is effectively the only European company in a battery industry dominated by South Korea, China and Japan.

It’s a late starter that is at least five years behind even SK Innovation, and its mass production technology has yet to be verified. But the shared assessment in the industry is that it’s a newcomer worth watching, given its close cooperative relationship with Volkswagen since 2019.

Also drawing notice is the ongoing large-scale investment it has received, with active financial support from the European Investment Bank and others.

A source in the South Korean battery industry explained, “Among the late starters, we see only Northvolt and SK Innovation as being meaningful competitors.”

The VW Group appears likely to rely on Northvolt’s battery technology for high-performance models in particular. Based on what the group announced Monday, Northvolt’s gigafactory in Skelleftea, Sweden, will be focusing on production of premium cells. In contrast, the German gigafactory in Salzgitter, which is run directly by Volkswagen, is focused on mass production of unified cells.

Northvolt has recently been hastening its efforts to boost its next-generation battery technology. On March 10, it announced its acquisition of the US battery company Cuberg. A Stanford University spinout established in 2015, Cuberg focuses on lithium-metal batteries, which have been talked about as a next-generation model.

By 2025, the two companies plan to produce a battery with energy density exceeding 1,000 watt hours per liter.

The latest announcement set stock prices tumbling for South Korean battery companies.

On Tuesday, LG Chem closed trading down 7.76% at 891,000 won (US$ 787.28) per share, while SK Innovation finished down 5.69% at 215,500 won (US$190.45) per share. Samsung SDI, which manufactures prismatic batteries, was down 0.87%.

By Lee Jae-yeon, staff reporter

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