Volkswagen leads auto majors’ charge into lithium market

Volkswagen (VW) has taken a major step in securing the future of its bold electric vehicle (EV) production targets by locking in a long-term lithium supply deal with China’s Ganfeng Lithium.

While the details of the MOU have not been disclosed, the company said it would provide the foundation for the introduction of 70 electrified models over the coming 10 years.

VW Group Board Member for Components and Procurement, Dr. Stefan Sommer, said that the deal represented “crucial strategic significance for implementing Volkswagen’s electric offensive”. 

This move brings the auto giant into closer alignment with the lithium ion supply chain. It was only last month that VW hinted at developing its own megafactory production, which it would require a secure supply base to achieve.

To date, Tesla and BMW are the only other auto OEMs outside of China to have directly secured lithium supply agreements.

A number of other battery and cathode producers have announced supply agreements over the past 18 months. However, with the margins at the battery and cathode section of the supply chain tightening, and with public markets failing to deliver financing of projects at the scale or speed required, end-user intervention in the supply chain has become inevitable.

Ganfeng already has supply agreements in place with BMW and LG Chem, amongst other stakeholders. To meet their supply agreements the Ganfeng will need to continue its aggressive lithium expansions, with the company aiming to take its production capacity to 75,000 tonnes in 2019 from output of 30,000 last year.

The company has a solid foundation of feedstock material through a number of partnerships, such as the Mt Marion project in Australia, Lithium Americas Cauchari-Olaroz development, and with agreements with Pilbara and Altura. However, despite their strong resource base it’s unlikely that the company will be able to fully meet their production target for the year.

From VW’s perspective the move was necessary to support its EV rollout, which Benchmark estimates will require 1,500GWh of cell production over the next 10 years. VW have for some time shown considerable interest in securing lithium and cobalt – including hosting two supply-side summits in late-2017 for the two minerals. The Ganfeng deal marks the first major success of VW’s raw material strategy, which is core to their electrification plans.

VW, however, is not an isolated case and all auto makers are becoming increasingly aware of the needs to secure lithium supply to meet EV targets.

The VW-Ganfeng announcement is the beginning of a new phase in which we are likely to see the auto industry’s incumbents involved in a scramble for lithium.

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