Northvolt to Supply Premium Batteries to Volkswagen for a Decade

In a deal worth $14 billion, Northvolt will enable Volkswagen to build an independent battery supply chain in Europe

Volkswagen’s massive order for lithium-ion batteries worth US$14 billion from Northvolt, Sweden’s star battery manufacturer, is expected to have a significant impact on the energy storage market. The auto manufacturer’s association with Northvolt began in 2019, when Volkswagen officially began working on its electrification strategy. Over time, Volkswagen became an investor in the battery manufacturing start-up, in addition to other heavyweights like the BMW Group. Northvolt has grown from an entry-level player to an enterprise that recently secured the highest venture capital funding recorded in the energy storage sector globally.

Northvolt Ett, a gigafactory under construction in Sweden

Northvolt Ett, a gigafactory under construction in Sweden, Credit: Northvolt website

Volkswagen’s recent mega-deal with Northvolt involves supplying the auto manufacturer with premium battery cells to plants scattered across Europe for the next 10 years. Currently, the battery manufacturer is building a gigafactory called Northvolt Ett from where it plans to build the batteries to be supplied to Volkswagen. The gigafactory is being built in Skellefteå, Sweden and is expected to begin operations by the end of this year.

Northvolt Spokesperson and VP of Communications and Public Affairs, Jesper Wigardt, said: “Northvolt has a very strong outlook on the European energy storage market, to which we will be delivering significant volumes in the form of battery modules and packs. In view of Northvolt’s recent supply order from Volkswagen, Northvolt Ett gigafactory will be significantly expanded beyond the 40GWh capacity we were targeting. To be distributed across several gigafactories, we’re aiming for 150GWh annual cell production in 2030 and we expect roughly 20% of those cell volumes to be committed to Northvolt Systems, with the majority of that directed to grid solutions.”

In addition to the one in Sweden, Northvolt has also been planning to build a gigafactory in Salzgitter, Germany. With an annual capacity of 16GWh, this factory is also being backed by Volkswagen which has, in fact, bought Northvolt’s shares in the joint venture. Northvolt appears to be Europe’s solution to developing an indigenous source of grid energy storage systems in order to reduce dependency on Asian suppliers. By consolidating battery production at Northvolt Ett, it will enable Volkswagen and other clients to build independent supply chains in Europe.