Volkswagen Shocks Tesla With $25 Billion Battery Deal

Volkswagen Group announced Tuesday morning that it has agreements in place with battery manufacturers to supply the automaker with batteries for its “Roadmap E” plan to build up to 3 million electric vehicles annually by 2025. The agreements are valued at around $25 billion, according to a report at Bloomberg.

The purchase agreements exceed agreements between Tesla Inc. (NASDAQ: TSLA) and its suppliers by more than 40%. Tesla buys lithium-ion cells that it then assembles into battery packs. The VW agreements call for finished batteries.

The deals VW has struck meet the company’s projected battery needs for Europe and Asia, the company’s two largest markets. A deal to supply batteries for the North American market remains to be completed.

Last September, VW put out a call for a massive purchase agreement for cobalt, a material used in making battery cathodes. Even though the company offered $59 billion to secure a cobalt supply, there have been no takers to this point.

VW’s Roadmap E includes building 3 million electric cars annually by 2025 and to market 80 new electric models. The company currently produces electric cars at three locations and plans to have another nine online over the next two years. By the end of 2022, VW expects to have 16 production sites for electric vehicles.

The German carmaker has got to be given credit for thinking big. Roadmap E sets a goal for the company to bring 300 electric vehicle models to market by 2030. Battery costs alone are likely to reach $50 billion. VW Group CEO Matthias Müller said, “From 2019, there will be a new electric vehicle virtually every month. This is how we intend to offer the largest fleet of electric vehicles in the world, across all brands and regions, in just a few years.”