Volkswagen sends supply LOI to Asian battery makers

Volkswagen has sent letters of intent (LOI) to Asian battery makers to buy batteries for use in its Modular Electric Drive (MEB) platform, TheElec confirmed Friday.

The project is dubbed TR5 __ LG Chem, Samsung SDI, SK Innovation and CATL has all replied that they wish to participate, people with direct knowledge of the matter said.

The size of the order is yet unknown but it will be worth around 20 trillion won, they said, level with that of the TR2 project in Europe.

Volkswagen has previously chosen battery vendors four separate times for use in its MEB platform. The projects were called TR1, TR2, TR3 and TR4.

LG Chem won the order for TR1. For TR2, South Korean companies LG Chem and Samsung SDI won the order for Europe, while compatriot SK Innovation won those for the US. Chinese vendor CATL won the order for TR2 China.

The combined worth of TR1, TR2, TR3 and TR4 was 60 trillion won for 150GWh of batteries. LG Chem and CATL won 29% of the total order, while Samsung SDI secured 15% and SK Innovation 13%.

Thank you, EV

The German car giant initially deemed the volume sufficient for use until 2025. But demand for electric vehicles (EV) were stronger than expected __ the auto-giant is now ordering another 150GWh to use 300GWh in total by 2025.

The company is planning to launch 70 electric vehicle models and sell 22 million units in the next ten years. Volkswagen’s joint venture with Swedish giant Northvolt is expected to produce 24GWh, which will be insufficient for that need.

Volkswagen’s investment of US$1.61 billion into China’s Guoxuan High-Tech for a 27% stake was likely to secure further battery supply. It is also planning to buy a 50% stake into Anhui Jianghuai Automobile that operates JAC Motors for US$491 million.

Though its latest TR5 order will be attractive for the Asian battery makers to increase their sales, profitability was a concern as Volkswagen was demanding batteries at a rate below the market price, the people said.

Price for each vendor different slightly but in general the German giant was paying US$100 to US$120 per 1kWh. Some vendors was supplying them at under US$100, much lower than the average EV battery price of US$135, they added.