Volkswagen is expanding its battery ambitions beyond the electric vehicle sector, entering the area of large-scale energy storage and electricity trading, as global demand for electric vehicles falls short of initial expectations.
Namely, on Monday, the largest European car manufacturer put into operation its first large-scale energy storage facility in Salzgitter, Germany. The system, which is part of Volkswagen’s Elli energy subsidiary, can supply up to 20,000 households with electricity for approximately two hours.
The plant is directly connected to the national grid, and will also be used for energy trading on the European electricity exchange EPEX SPOT. It uses battery cells from Volkswagen’s in-house PowerCo division, which once planned to build as many as seven battery factories for electric vehicles, but has already scaled back ambitions for its German cell factory, also based in Salzgitter.
According to Bloomberg Business, Volkswagen is actively seeking new sources of revenue from batteries as dominant Chinese suppliers cut prices and growth rates for electric vehicle sales slow. Energy storage, on the other hand, is in high demand due to the increase in the number of energy-intensive data centers and the increasing number of renewable energy plants connecting to the power grid.
Adjustment of strategy due to slower growth
The company’s original goal was to secure enough production capacity to supply about three million electric vehicles a year by 2030, a goal set at a time when growth forecasts were significantly more optimistic.
“Energy storage and trading represents a new strategic business area with great potential for growth,” said Chief Executive Officer Oliver Blume.
Since the creation of the PowerCo division in 2022, Volkswagen has halved the planned capacity of the Salzgitter plant to 20 gigawatt-hours per year, reflecting a weaker-than-expected uptake of electric vehicles. Although the company is sticking to long-term plans for up to 200 gigawatt-hours of capacity at three planned plants in Germany, Spain and Canada, management acknowledged that expansion will depend on conditions in the automotive market.
VW also reduced overall investment plans for the entire group and announced that PowerCo may seek external financing for its medium-term needs.