To Produce EV Batteries on Its Own
Chinese newspapers reported that Volkswagen is about to acquire 20 percent of shares of Guoxuan by investing US$56 million. Guoxuan is the fourth-largest electric vehicle (EV) battery manufacturer in China and the eighth-largest EV battery manufacturer in the world.
Earlier, Volkswagen said that it would sell 1.5 million EVs in China a year until 2025 and increase its investment in China by 1.6 billion euros next year. According to industry experts, many of those vehicles are expected to come with batteries supplied by Guoxuan.
At present, the Chinese government is limiting its EV subsidies to EVs equipped with batteries manufactured by Chinese companies and is planning to extend the policy scheduled to expire in December this year. According to market research firms, Guoxuan’s global market share rose from 1.7 percent to 2.1 percent from August 2018 to August 2019. Volkswagen is expected to be able to benefit from the policy by investing in Guoxuan.
According to South Korean EV battery manufacturers, Volkswagen’s investment can lead to self-battery production. In fact, Volkswagen announced last year that it would build a battery manufacturing plant with Swedish company Northvolt and is working with SK Innovation to build a gigafactory in Europe. Volkswagen can obtain battery manufacturing know-how as well if the investment leads to participation in management. Last year, the European Commission announced that it would provide 3.2 billion euros in subsidies to accelerate the growth of the European battery industry, which means conditions are getting better and better for self-battery production by Volkswagen.
The outlook of the global EV battery market is very bright. Last year, the global EV battery supply and demand were 326 GWh and 190 GWh, respectively. However, the respective figures are estimated to reach 776 GWh and 916 GWh in 2023 and the undersupply is predicted to continue until 2029. In addition, the global EV battery market is forecast to have a size of US$167 billion in 2025 to exceed the size of the global memory semiconductor market by a margin of US$17 billion.
According to market research firm Wood Mackenzie, Volkswagen is expected to produce at least 16 million EVs until 2028 and its share in the global EV market is expected to reach 53 percent in 2030. This implies that LG Chem, SK Innovation and Samsung SDI, which are investing trillions of won in the EV battery industry, may lose half of the market depending on Volkswagen’s choice.