Volkswagen picks partners for $25bn battery orders in electric cars push

Europe's biggest car maker plans to introduce more electric vehicle models

Matthias Mueller, chief executive officer of Volkswagen, says the company has secured $25bn worth of battery supplies to push into electric cars in the coming years. Krisztian Bocsi / Bloomberg

Volkswagen has picked partners to provide battery cells and related technology worth around €20 billion ($25bn) for its growing electric car programme, adding further pressure on US pioneer Tesla.

Until its "dieselgate" emissions scandal was revealed two-and-a-half years ago, Europe's largest automaker had been slow to embrace electric cars.

But the fraud prompted a strategic shift, while advances in batteries and a global fight against pollution are raising pressure on car makers to adopt zero-emission alternatives.

Volkswagen said on Tuesday it had secured battery technology deliveries for Europe and China, where it sells 80 per cent of its vehicles, and will select a supplier for North America soon.

While Tesla's much-anticipated Model 3 sedan has already missed some key production targets, VW plans to expand assembly of zero-emission cars to 16 plants globally through the end of 2022 from three at present.

"We have pulled out all the stops over the past months to implement the Roadmap E swiftly and resolutely," the chief executive Matthias Mueller said at a news conference, referring to the electric vehicle programme.

VW's emissions scandal, new Chinese quotas for electric cars and tightening rules on carbon dioxide emissions in Europe are causing automakers to focus on green cars and self-driving technology.

VW has a goal to sell 3 million electric cars per year across the group by 2025 and to offer an electric version of each of the group's 300 models by 2030.

LG Chem, Samsung and Chinese battery maker Contemporary Amperex Technology  will deliver batteries to VW, which has no plans to start producing power packs by itself, Mr Mueller said.

"Building up expertise and mastering the technology does not necessarily imply that we want to start large-scale assembly of batteries ourselves," the chief executive said. "Others can do it better than we can."

Although grappling with billions of euros in costs and fines for dieselgate, VW has pledged to spend 34bn euros on EVs, autonomous driving and new mobility services by the end of 2022, one of the most ambitious plans in the industry.

Separately, the German car maker reiterated guidance for higher vehicle sales and revenue this year and for a group operating margin of 6.5 to 7.5 per cent after 7.4 per cent last year.

In an interview with Reuters TV, Mueller denied top management had a pessimistic view on VW's business prospects in 2018, but said potential bottlenecks as car makers rush to get models through new so-called WLTP lab tests for emissions and fuel consumption were causing uncertainty.

"We have to deal with WLTP this year," he said. "It's simply too early to speculate whether this will be an especially good year or a normal year."