Volkswagen Places $14B Order With Battery Manufacturer Northvolt In EV Push

Volkswagen AG VWAGY and Swedish battery manufacturer Northvolt announced Monday an expansion to their already existing partnership.

What Happened: Volkswagen placed a $14 billion order with Northvolt to supply premium battery cells to be used by its European operations. The contract is for 10 years.

Northvolt will be Volkswagen's lead premium battery supplier in Europe, the companies said.

Volkswagen will also increase its ownership interest in the Swedish company.

The expanded partnership between the companies will focus on Northvolt's Swedish Gigafactory, helping it achieve further economies of scale, reduced complexity and a better environmental footprint. The companies had initially entered into tie-up in 2019.

Northvolt has also agreed to sell its joint venture share in Salzgitter, Germany, to Volkswagen as the latter  scales  up its battery manufacturing efforts in Europe.

"Volkswagen is a key investor, customer and partner on the journey ahead and we will continue to work hard with the goal to provide them with the greenest battery on the planet as they rapidly expand their fleet of electric vehicles," said Peter Carlsson, co-founder and CEO, Northvolt.

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Why It's Important: Traditional automakers are making a big push into EV manufacturing, given the regulations that call for increasing the share of EVs as a percentage of total vehicles sold.

The Northvolt deal comes at a time when South Korean battery manufacturers LG Energy Solutions and SK Innovation are locked in a legal battle in the U.S. over theft of trade secrets.

In a verdict issued in February, the U.S. International Trade Commission ruled against SK Innovation, banning it from importing into the U.S. certain batteries and components for a period of five years. Volkswagen receives its battery supplies for its U.S. plants from SK Innovation.

Last week, Northvolt announced the acquisition of U.S.-based battery technology company Cuberg. Cuberg manufactures high-performance lithium metal cells produced on existing lithium-ion manufacturing lines for electromobility solutions.

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(Photo: Volkswagen)