Thomas Schmall:
“Success Factor
Raw Materials”

First of all, e‑mobility is and will remain the key to greater cli­mate pro­tec­tion in traf­fic and trans­porta­tion. Elec­tric dri­ves will be pow­er­ing most of the vehi­cles on our roads in the future. We as a com­pa­ny have made a very clear com­mit­ment to elec­tri­fi­ca­tion and are pur­su­ing this strat­e­gy world­wide. But the shift to elec­tric cars means chang­ing the entire value chain. The tech­no­log­i­cal and com­mer­cial heart of each vehi­cle is now the bat­tery. And when you look at bat­ter­ies, you quick­ly see that raw mate­ri­als are by far their largest cost item. A cru­cial fac­tor on the road to afford­able elec­tric cars for every­one there­fore con­sists of com­pet­i­tive costs for bat­tery mate­ri­als like lithi­um and nickel.

A sta­ble sup­ply of raw mate­ri­als has in fact become a major com­pet­i­tive fac­tor. Not only for Volk­swa­gen but for the entire indus­try. The short­ages have less to do with glob­al deposits than with the avail­able capac­i­ties for min­ing and fur­ther pro­cess­ing them. Over the past years we’ve seen very volatile raw mate­r­i­al prices, a ver­i­ta­ble roller coast­er. In order to shield our­selves from this over the long term, we’re tak­ing a very strate­gic approach to raw mate­r­i­al procurement.

PowerCo’s strat­e­gy is based on an inte­grat­ed value chain. That means tak­ing all the rel­e­vant areas, from raw mate­r­i­al pro­cure­ment and pro­cess­ing to cell pro­duc­tion and recy­cling, into its own hands — both inde­pen­dent­ly and with partners.

Right now we get all our bat­tery cells from exter­nal sup­pli­ers, who also pro­cure the raw mate­ri­als. That will change in 2025 when Pow­er­Co begins run­ning its first gigafac­to­ry in Salzgit­ter and pow­ers up its own cell pro­duc­tion. Gigafac­to­ries in Valen­cia and in St. Thomas in Cana­da will fol­low. At the same time, we’ll be tak­ing greater con­trol of our raw mate­r­i­al pro­duc­tion and processing. 

Here’s one exam­ple: we found­ed the IONWAY com­pa­ny with our Bel­gian part­ner Umi­core to pro­duce cath­ode and pre­lim­i­nary mate­ri­als. That’s basi­cal­ly the step between mines and cell fac­to­ries. We’re work­ing togeth­er to build Europe’s largest cath­ode pro­duc­tion plant in the Pol­ish town of Nysa.

Above and beyond that, recy­cling and sec­ond-life appli­ca­tions are also impor­tant, such as using old e‑car bat­ter­ies in ener­gy stor­age sys­tems. We need that in order to cover our long-term raw mate­r­i­al needs on our own. It’s good for the envi­ron­ment, and it’s also its own busi­ness divi­sion with con­sid­er­able poten­tial to make our prices even more competitive.

We’re look­ing at that very close­ly right now. We cer­tain­ly want direct access to the rel­e­vant raw mate­ri­als. To do that, we’re con­cen­trat­ing on long-term sup­ply con­tracts with raw mate­r­i­al pro­duc­ers and on finan­cial instru­ments to secure prices, but can also imag­ine invest­ing direct­ly in mines. That makes it eas­i­er to cal­cu­late not only access to key mate­ri­als but also costs. The cur­rent sta­tus is that Pow­er­Co has already cov­ered a large part of its rel­e­vant bat­tery mate­r­i­al needs up to 2030. The goal is a robust, sus­tain­able, and com­pet­i­tive sup­ply of raw mate­ri­als, enabling us to ensure our trans­for­ma­tion to elec­tro­mo­bil­i­ty and take the next step toward world­wide lead­er­ship in e‑mobility solutions.

It’s not a mat­ter of inde­pen­dence but rather of a rea­son­able bal­ance. We’ll con­tin­ue to use exter­nal sup­pli­ers in the future, includ­ing from Asia and China. But with Pow­er­Co we’re estab­lish­ing our own strong alter­na­tive for the core field of bat­tery technology.

We take our respon­si­bil­i­ty for sus­tain­abil­i­ty, the envi­ron­ment, and human rights very seri­ous­ly — not only on paper. Volk­swa­gen already requires its sup­pli­ers to com­mit to high sus­tain­abil­i­ty and safe­ty stan­dards. And we mon­i­tor com­pli­ance on site. By 2040, more than 95 per­cent of the Group’s sup­pli­ers should be able to demon­strate a pos­i­tive sus­tain­abil­i­ty assess­ment and cer­ti­fied envi­ron­men­tal man­age­ment. We’re also mak­ing our­selves very trans­par­ent as a com­pa­ny: for four years now we’ve been pub­lish­ing a Respon­si­ble Raw Mate­ri­als Report on our own ini­tia­tive. It cov­ers 18 raw mate­ri­als we’ve iden­ti­fied as crit­i­cal to the sup­ply chain, includ­ing bat­tery mate­ri­als such as lithi­um and cobalt. As far as I know, we’re the first in our indus­try to do so.

That’s what we’re after. We want to make a pos­i­tive con­tri­bu­tion to trans­form­ing the raw mate­r­i­al sec­tor and to min­i­miz­ing the con­se­quences of extrac­tion as much as pos­si­ble. With direct access to mines and their oper­a­tors, Pow­er­Co will give us more oppor­tu­ni­ties to do so. But I have to warn against unre­al­is­tic expec­ta­tions. Decar­boniz­ing the econ­o­my and soci­ety will always impact nature in some way — the process­es are cur­rent­ly high­ly depen­dent on raw mate­ri­als such as lithi­um, cobalt, and nick­el. The mate­ri­als we extract today are the key to pro­tect­ing the cli­mate in the future. Recy­cling as part of a raw-mate­r­i­al loop can also con­sid­er­ably reduce the impact over the fore­see­able future.

The road we’re tak­ing to get there, with its clear com­mit­ment to sus­tain­abil­i­ty, is both nec­es­sary and very chal­leng­ing. How­ev­er, it will pay off with sys­tem­at­ic decar­boniza­tion, the prospect of lower envi­ron­men­tal con­se­quences through­out the entire value chain, high­er vol­umes, and greater con­trol over costs. That will mean lower-priced cars with ade­quate prof­it mar­gins, which will enable us to achieve our goal of mak­ing sus­tain­able mobil­i­ty avail­able to everyone.

That’s cor­rect. Inte­grat­ing the entire bat­tery sup­ply chain does in fact offer new oppor­tu­ni­ties. In the future we’ll know much more pre­cise­ly where the raw mate­ri­als for our e‑cars come from. For exam­ple, mine oper­a­tor agree­ments can require them to work with IRMA stan­dards, which are the best and high­est stan­dards for respon­si­ble min­ing. We can also ensure com­pli­ance con­sid­er­ably bet­ter, for instance with new pos­si­bil­i­ties aris­ing for dia­logue on site with local com­mu­ni­ties. That’s part of the respon­si­bil­i­ty we’re taking.

Sus­tain­abil­i­ty at any price is just as unhelp­ful as ruth­less­ly low costs. Our goal is to com­bine the two require­ments and set the indus­try stan­dard for sus­tain­able and com­pet­i­tive bat­tery cells. Pow­er­Co is plan­ning to reduce bat­tery costs by up to 50 per­cent with its uni­fied cells. At the same time, we’re work­ing on a series of tech­nolo­gies and mea­sures to sub­stan­tial­ly lower our resource require­ments over the com­ing years and decades. That includes min­i­miz­ing car­bon emis­sions from raw mate­r­i­al extrac­tion, and also using bat­ter­ies that don’t con­tain any cobalt or nick­el. Our cell fac­to­ries will be oper­at­ing on car­bon-neu­tral power. We’re also bank­ing very strong­ly on a cir­cu­lar econ­o­my that imme­di­ate­ly recy­cles pro­duc­tion sur­plus­es and reuses the raw mate­ri­als from bat­ter­ies at the end of their ser­vice lives. In Salzgit­ter we’re run­ning our own recy­cling plant to fur­ther max­i­mize our quo­tas here. All these steps will also ben­e­fit our cus­tomers. For Pow­er­Co I can say we’re not yet where we want to be, but we stand behind our vision and are work­ing hard to achieve it.