Volkswagen AG VWAGY is strengthening its position in the European electric vehicle (EV) battery market through a partnership with China-based Gotion High-Tech. The companies plan to expand regional production of lithium iron phosphate (LFP) batteries and cathode materials, supporting Volkswagen’s strategy to establish a competitive and more secure European battery supply chain.
LFP batteries offer competitive costs, long service life and strong durability, making them increasingly important for affordable EVs in the volume segment. Their share of the European battery market is expected to increase from around 10% currently to 40-60% by 2030.
Volkswagen Expands LFP Production With Gotion
Under the agreement, Gotion will invest around €1.1 billion (about $1.25 billion) for a 49% stake in the Valencia site, with PowerCo retaining a 51% majority. The Valencia plant is expected to become a European production hub for LFP battery cells and Unified Cells.
PowerCo is expected to contribute around €470 million in total by 2030 to acquire a 49% stake in the Šurany cell factory in Slovakia and a new cathode-material facility in Kenitra, Morocco. Gotion will hold the 51% majority in both. The deal remains subject to regulatory approvals and Gotion shareholder approval.
VWAGY Strengthens European Battery Supply Security
The agreement builds on a partnership between Volkswagen and Gotion that dates back to 2020. Gotion already supplies cells to Volkswagen and works with its battery arm, PowerCo, as a strategic partner. Volkswagen is currently Gotion's largest single shareholder, holding about 24%. Separately, it has agreed to sell a 5.3% stake, while keeping its board representation and voting rights, pending regulatory clearances.
The joint ventures are expected to strengthen regional battery production, reduce supply-chain concentration and improve access to key cathode materials.
The agreement marks a major breakthrough for both companies and brings them closer to the forefront of electric mobility.
Price Performance of VWAGY
Shares of VWAGY are down 26.7% over the past year compared with the industry’s 20.3% fall.
VWAGY’s Zacks Rank & Key Picks
VWAGY currently carries a Zacks Rank #4 (Sell).
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This article originally published on Zacks Investment Research (zacks.com).