Will PowerCo’s battery subsidiary go public soon?

Will PowerCo’s battery subsidiary go public soon?

Wolfsburg The goal is clear: Volkswagen’s new subsidiary PowerCo is to become Europe’s most important manufacturer of battery cells in a few years. By 2030, six so-called “gigafactories” will be built on the continent, which will be enough for up to five million electric cars, investment requirements: 20 billion euros. The current 350 employees are expected to increase to 20,000 by the end of this decade. A slightly later IPO is also being discussed.

Meanwhile, PowerCo is looking for more residential areas in North America, where Volkswagen is also considering its cell plants. “The focus is now on Europe, the US is an option,” says Kai Müller, CFO of the new VW subsidiary, in an interview with Handelsblatt.

In the long term, Volkswagen does not want to finance the development of cell production alone. “Financial investors can be added from next year,” adds Volkswagen CFO Arno Antlitz. There are already initial inquiries from potential investors. “Startups usually have no money, no product to market, no customers. This is different from PowerCo. We have a major customer, Volkswagen. We have working technology and start-up funding. The interest of third parties in investing in us is just as great,” adds Kai. Müller.

In another step, the battery subsidiary of the VW Group could at least be listed on the stock market. However, this is a consideration for the future, which will be reached in 2024 at the earliest or even later. First of all, the new company must be further developed. In 2030, the Volkswagen Group wants to reach 50 percent of its global sales with electric vehicles, and a share of 70 percent is planned for Europe.

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Because the new PowerCo – the former internal working name of the VW subsidiary is now the official name – was established directly as a European stock corporation (“SE”), the IPO will be relatively easy – there is already a board of directors and a board of management. A subsequent legal reorganization will also be left in the event of a potential IPO.

A step that was taken carefully, as VW CFO Antlitz emphasizes. “We want an independent, competitive company and fundamentally also a company with capital market potential.”

Later, Volkswagen may also list other subsidiaries that have the same cross-functionality for the whole group as the new PowerCo. Compared to the new battery subsidiary is VW Financial Services (VWFS), which is responsible for establishing the mobility platform. All software activities of the group are integrated in Carad SE.

The VW Group is confident that the new battery subsidiary, which was shut down on July 1, will soon be able to catch up with established cell manufacturers from Asia. “We can increase. This will help us in our ambitious improvement and give us great profits,” says CFO Antlitz. To further expand technical expertise, PowerCo will continue to hire chemists and other battery experts.

Volkswagen PowerCo: In-house battery production should reduce dependency

Unlike many other car manufacturers, Volkswagen has decided to start completely independent battery production. This should prevent over-reliance on large cell manufacturers from China, South Korea and Japan. By 2025, the car company will only buy cells from Asian suppliers, after which local production will begin. Last week, the foundation stone was laid for VW’s first cell factory in Salzgitter, Lower Saxony.

The new VW subsidiary will move into its headquarters right next to the planned cell plant in Salzgitter. 2,500 people will later work at PowerCo headquarters. Together with all the gigafactories, Volkswagen’s battery subsidiary is expected to have annual sales of 20 billion euros. If the PowerCo factories produce enough battery cells for the VW Group’s brands in a few years, production can be expanded later to other car manufacturers.

This strategy has been accepted by the investor circles. “Given the structural shortages in the battery market and the geopolitical uncertainty, independent factories are an important prerequisite for a major global role in electric vehicles,” says Patrick Hummel, automotive analyst at UBS in Switzerland.

With six cell plants planned, only initially passenger car production of the VW Group could be used. But the trucks of trucking subsidiaries MAN and Scania also have to be electric after 2030 – and therefore need battery cells.

“Discussions are ongoing,” explains PowerCo board member Müller. In any case, car and truck cells should have the same design. Hence the need for trucks can also be served by expanding the six factories currently planned.

PowerCo wants to introduce a unit cell in its cells that can cover about 80 percent of the needs of the entire group. “This ensures less complexity than most of the competition,” says VW CFO Antlitz. For some of their particularly sporty models, the Audi and Porsche subsidiaries in particular will use batteries that are not covered by the standard from Salzgitter.

>>Read herewhy lithium is so limited in cell supply.

Cell cell means external format. The inner workings – the chemistry – can still be completely changed. For example, entry-level electric models planned for 2025 are to have battery cells based on iron phosphate (“LFP”). They are much cheaper than conventional cobalt batteries, making an entry price for electric cars of less than 25,000 euros possible.

PowerCo’s other task will be to source its own raw materials. “There is a real flight to raw materials,” says PowerCo CFO Müller. Here too, a close conversation takes place. Müller: “Because our sales are already guaranteed today, we have a strong negotiating position.” First and foremost is lithium. and cobalt and nickel he asked.

Even before the start of PowerCo, the VW group had concluded supply agreements with raw material producers. As an independent company, the new subsidiary will now handle this. This acquisition of raw material chains can cost extra money. A member of the board of the group Antlitz speaks of “a large amount”.

There is also a great demand for machines that are used in gigafactories for cell production. So far, Asian service providers have also dominated in this field. Volkswagen and Bosch want to tackle this together. So two large German groups are establishing a joint venture focusing on machinery and cellular manufacturing systems.

More: In the future with “Salzgiga” – VW is laying the foundation for a prototype battery production plant.