Frank Blome explains Volkswagen's battery strategy

Introduction: This year, Europe is facing strong emission demands. At present, PSA, BMW and Daimler are providing both  PHEV  and BEV models. In particular, the latter two luxury car companies are focusing on the speed and scope of PHEV model launch before their own BEVs are ready in large quantities. Volkswagen is now carrying the flag and continuing to lead  MEB  in a unique way.

Strictly speaking, MEB is not an option for Audi and Porsche. In 2020, they will still expand and prepare for the development of PPE on the original basis. Basically, all of Volkswagen's bets are on the mass production of the MEB platform in Europe in 2020, mainly on the Volkswagen, SK Telecom and SEAT brands. Constantly emphasizing the effectiveness of battery strategy and electric vehicle platforms has become a kind of political correctness. Putting aside the epidemic, there are actually great risks involved.   

01 Battery information update as explained by Frank Blome

Frank Blome is Volkswagen Group Components, Head of Business Unit Battery Cell. His PPT has 9 pages in total, mainly describing the following aspects: 

1) Scalability of battery system: 7 modules as the lowest solution, 12 modules as the highest solution. It is not certain whether the 24/36kWh of ID1 will adopt the current layout. There are several core issues here. The 7-module solution shown in the figure below has low space utilization. The original plan for the lowest 8-module solution was to remove one module due to the need to reduce the price of ID3, which resulted in the waste of two empty modules. Compared with the current domestic 590 solution, it basically starts with 10 modules (tolerating a certain low voltage), so there is a public configuration of power here. The power tolerated by Europe is lower than that of China.

Figure 1. Volkswagen's modularity 

2) Reduction in battery cell cost: I think there is a big problem here. Let’s compare two very important points: In 2017, Audi negotiated a target price of $114 for battery cells for 2019-2020. This was said by Audi’s CTO Dr. Peter Mertens.

来源“We have opted for a top-down strategy because most buyers will be found in this segment. Currently, one kilowatt-hour costs around 100 euros (~$114 USD per kWh) depending on the model.

In March 2020, at an analyst meeting, Volkswagen estimated that the price of battery cells would be controlled at US$100/kWh before 2025.

来源：Volkswagen is embarking on a mass production push to build three million electric cars by 2025, requiring 300 gigawatt hours worth of battery cells, mainly in Asia and Europe, he said. Ramping up manufacturing battery packs at scale will help the carmaker to cut battery cell costs far below US$100 per kilowatt hour by 2025, he said. 

Judging from the current situation, the price given by Volkswagen and GM depends on the purchase volume. In fact, according to GM, this price may come earlier. I think this price drop will directly lead to car companies entering the production of battery cells. The cost of battery cells has reached a bottleneck. No matter how much you have, the supplier will give you this price. This involves the chemical system of the battery cell. The battery cells currently used by Volkswagen are mainly the first batch on the previous ID3 and the previous soft-pack battery cells (E-tron, Taycan). They are all based on the 6 series, with a content ratio of 65% nickel, 15% cobalt, and 20% manganese. 811 will be introduced from 2021. In other words, from the previous 390 module battery cell to the MEB590 module, if the battery cell does not change, the price will remain unchanged, and it will switch to 811 in 2021, with an annual reduction of 3 US dollars per wh.

Figure 2: With this operation, the price of battery cells drops by 3 US dollars per year 

If we take the MEB1 of 2019-2020 as the pilot, the subsequent MEB2 may introduce silicon-carbon negative electrode in 2023-2034 to increase energy density and fast charging capability. This is more of an improvement in performance, and the cost of battery cells has not dropped much. 

Figure 3 Volkswagen’s battery cell strategy 

Solid-state batteries, as a possible longer-term plan for MEB 3, are expected to be developed together with Quantum Scape. They will not be included in the overall battery plan until 2026, and it is not entirely clear whether the cost will bring about a substantial improvement.

02 Car companies involved in battery cell production

Since Toyota and GM have both been involved in the production of battery cells, and it seems that they can control the price more easily than buying battery cells. In the materials of this meeting, NorthvoltAB, which is invested by itself, is a very important part. This battery cell company, which holds a 20% stake, plans to supply battery cells to Volkswagen from 2023, mainly through the joint venture factory between Volkswagen and NorthvoltA. This will start with a plan of 16GWh (expanded to 24GWh in the future), and the German battery factory with an area of ​​180,000 square meters will be the focus of Volkswagen's attention. Volkswagen's current European battery cell supplier for MEB is only LG Chem, and in the next step, with the production of several strategic partners in Europe, the demand will be divided among three suppliers (Volkswagen currently seems to have three demands for large-scale markets). At present, one of the two added may be the soft-pack SKI and CATL's factory in Germany. Whether Samsung SDI will still have a chance depends on the subsequent prices. The price increase was fast at the beginning, and then Volkswagen found that these companies all increased their prices. 

Figure 4 Volkswagen's battery factory

 Summary: At present, Volkswagen's MEB procurement strategy has encountered setbacks. The continuously increasing planning volume cannot bring about the expected price reduction of battery cells. The money invested in battery cell production is still indispensable. It is really unclear whether the overall strategy will be adjusted in a few months after the epidemic in Europe. If the step is too big, it is easy to cause trouble.