Volkswagen builds a European LFP base with Gotion

A chemistry Europe has yet to manufacture

Europe wants to build affordable electric cars, but it does not yet make the cells that would let it. LFP batteries offer competitive costs, a long service life and high levels of robustness, which makes them a key technology for affordable electric mobility in the volume segment. Forecasts suggest that LFP's market share could rise from around 10 per cent today to between 40 and 60 per cent by 2030. Europe currently has no relevant LFP battery production capacity.

That gap is the backdrop to an agreement announced across Salzgitter, Hefei and Valencia. Volkswagen Group, PowerCo SE and Gotion High-tech have agreed to deepen a partnership that dates back to 2020, moving from cell supply into the industrial production of LFP cells and cathode active material.

The tie-up also covers joint procurement and sales activities in Europe. For carmakers, this is less a sourcing story than a question of who will master an unfamiliar production process on European soil, and how quickly.

Thomas Schmall, Member of the Board of Management of Volkswagen Group for Technology and Chairman of the Supervisory Board of PowerCo SE, framed it as a step forward for both sides. He said, “I am delighted that we are expanding our long-standing partnership with Gotion into the joint industrial production of LFP batteries to strengthen Europe’s battery industry.

"This marks a major breakthrough for both companies and brings us one step closer to the forefront of electric mobility. Volkswagen is the first European automotive manufacturer to cover the entire battery value chain, from development and cathode materials through to production.”

He added, “Gotion has been a close partner of the Volkswagen Group for many years. We are now expanding our partnership into joint industrial production of LFP batteries to strengthen Europe’s battery industry. This marks a major breakthrough for both companies.”

Find out how Volkswagen wants to become more competitive again

Volkswagen is tightening its cost-cutting course. The Group wants to reduce overcapacity, realign production networks and cut around 50,000 jobs across the Group by 2030. The measures are intended to save more than €6 billion ($6.9bn) annually.

Three sites, three different functions

The structure is strategic and deliberate to the goal. Each site has a distinct manufacturing role, and each carries a different balance of control.

Valencia is the centrepiece. The PowerCo gigafactory now under construction in Spain is envisaged to be transferred to a joint venture in which PowerCo holds 51 percent and remains the majority shareholder. PowerCo and Gotion would manage it jointly. One major goal is to turn the site into a European production hub for Unified Cells based on LFP technology. The planned investments and job creation measures remain as announced. Because the plant is still being built, the LFP requirements can in principle shape it from the outset rather than being retrofitted.

Šurany in the Slovak Republic runs the other way. The existing Gotion cell factory is intended to move into a joint venture in which Gotion holds 51 percent and stays the majority shareholder, again with joint management by PowerCo and Gotion. The focus is on LFP cells for both EV applications and energy storage systems (ESS). Serving two markets from one line is a useful hedge, since it gives the plant a second source of demand while EV volumes find their level.

Kenitra in Morocco moves upstream. The joint venture there plans a new facility to produce cathode material for LFP batteries, with Gotion holding 51 percent and the two partners managing it together. The aim is to diversify sources of supply for key cathode active materials, increase supply security and expand the regional value chain.

Shared management, shared learning

Majority stakes settle who consolidates the numbers - but they do not settle who runs the line. All three ventures are intended to be jointly managed, so process decisions on yield, ramp-up and quality will need agreement between two companies with different histories. Gotion is already a cell supplier to the Volkswagen Group and a strategic partner of PowerCo. PowerCo brings its Unified Cell format and its own gigafactory programme.

Frank Blome, CEO of PowerCo SE, put the logic in terms of resilience. He said, “Volkswagen and PowerCo are building Europe’s battery industry. The partnership with Gotion is the next milestone on this path: It strengthens the resilience of our value chain, accelerates industrialization and combines PowerCo’s capabilities with the strengths of a long-standing partner.”

The engineering questions are in fact, easy to list. LFP swaps nickel-rich cathodes for iron phosphate, which changes the materials, the electrode processing and the way packs are designed around a cell that typically stores less energy per kilogram. A plant producing both EV and ESS cells adds another layer of product management. None of this is extraordinary, but doing it at gigafactory scale in Europe, for the first time, leaves little room for a slow learning curve.

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The money, and the conditions

The financial terms, we are seeing, are asymmetric by design. PowerCo is expected to contribute around €470 million ($539 million) in total to the Šurany and Kenitra sites by 2030 to acquire its 49 percent stake. In return, Gotion is to invest around €1.1 billion ($1.3 billion) to acquire its 49 percent stake in Valencia, reflecting the scale and strategic importance of the European production hub. Put simply, Gotion pays more to enter the site that matters most to Volkswagen's volume plans, while PowerCo pays less to join two sites where its partner leads.

The agreement remains subject to regulatory approvals and customary closing conditions, including approval by the Gotion shareholders’ meeting. Until those boxes are ticked, the plans are intentions rather than production schedules.

A smaller shareholding, an unchanged voice

Alongside the joint ventures, Volkswagen Group, through its subsidiary Volkswagen (China) Investment Co., Ltd. (VCIC), has entered into definitive agreements to sell a 5.3 percent equity stake in Gotion. The stated aim is to optimise shareholding structures and support long-term strategic synergy. Volkswagen had previously agreed not to exercise voting rights for part of its shareholding, so the transaction will not reduce the voting rights Volkswagen Group exercises in Gotion.

Its Board of Directors representation and other nomination rights are unaffected. Volkswagen will remain a strategic investor, and the sale is subject to all required regulatory clearances.

Li Zhen, Chairman of Gotion High-tech, described the relationship in personal terms. He said, “Six years of close collaboration between Volkswagen and Gotion have built deep mutual trust and a relationship that empowers both sides—one that has long since moved beyond ordinary business to become a partnership bound by a shared future. Today, together with Volkswagen Group and PowerCo, we are accelerating our global strategic cooperation. Through cross-shareholdings and three joint sites, we are anchoring our shared strategy to localise battery production in Europe, racing to seize the opportunities of global electric mobility, and jointly forging a new paradigm of world-class, win-win cooperation in the lithium battery industry.”

What plant managers should watch

But all things considered, contracts and stakes seem to be the easy part. The harder measure will come on the factory floor, in first-pass yield at Valencia, in how quickly Šurany balances EV and ESS output, and in whether Kenitra delivers cathode material that cell lines can actually use. Volkswagen has said it is the first European carmaker to cover the entire battery value chain. Covering a chain on paper is one thing. Running it, cell by cell, is where the claim will be tested.