Volkswagen has expanded its partnership with Chinese battery company Gotion through three joint ventures aimed at building a European base for producing lithium iron phosphate (LFP) batteries, a battery chemistry that is less expensive and more durable than some alternatives and is increasingly used in electric vehicles targeting the mass market.
The move is part of Volkswagen’s plan to develop a unified battery cell that can be used across the group’s brands, from Volkswagen to Porsche, while supporting different chemistries that may eventually include solid-state batteries. The company is betting that this design will provide greater flexibility in integrating cells into multiple models while lowering the cost of electric vehicles aimed at a broader segment of buyers.
Three Projects in Spain, Slovakia, and Morocco
Under the agreement, Gotion will pay $1.25 billion for a 49% stake in the PowerCo plant in Valencia, Spain. The plant will be jointly operated by PowerCo and Gotion and will become, according to Volkswagen, a European hub for producing unified cells using LFP technology, with capacity of up to 29.1 gigawatt-hours.
Volkswagen will also spend approximately $535 million through 2030 to acquire a 49% stake in Gotion’s plant in Slovakia and establish a new facility in Morocco. The Slovakian plant, with capacity of 8.4 gigawatt-hours, is expected to produce LFP cells for vehicles and stationary energy-storage applications, while the Moroccan facility will produce cathode materials used in LFP batteries.
Why Does This Matter?
Volkswagen says the share of LFP batteries in Europe could rise from 10% currently to between 40% and 60% by 2030, while the continent currently has no significant production capacity for this chemistry. The announcement therefore is not merely about adding a model or specification, but about attempting to move part of the LFP supply chain to Europe and reduce the industry’s dependence on Chinese production, which dominates this chain.
LFP batteries benefit from lower costs and durability, and their energy density has improved compared with the past, making them particularly suitable for lower-priced electric vehicles, although the source does not specify which models will use the new cells or the final prices of the vehicles.
A More Competitive Industrial Context
Other companies are moving in the same direction. In Spain, Stellantis and CATL are building a plant with capacity of 50 gigawatt-hours that is expected to begin cell production next year. Outside Europe, Ford licensed technology from CATL to produce its cells in Michigan, while Gotion’s facility in Illinois will supply LFP cells for the Slate truck, and Tesla and LG began producing LFP cells in the United States this year for use in stationary energy-storage systems.
Volkswagen’s agreements come as the group restructures its business, including cutting tens of thousands of jobs and reducing its manufacturing footprint and the number of models, as a result of rising costs and intensifying competition. The project therefore represents an industrial bet on reducing battery costs and localizing production, but by itself it does not establish when cheaper cars will arrive or whether they will succeed commercially; the announced capacity, operating timeline, and allocation of cells among the group’s brands remain decisive factors.