German automaker Volkswagen Group (VW) is reportedly planning a significant expansion into the electric vehicle (EV) sector.
According to media reports, VW is looking to build a new lithium-ion battery manufacturing facility on a similar scale to Tesla’s so-called ‘Gigafactory’.
However, while Tesla’s factory cost around $5bn, the planed VW factory will reportedly cost more than twice that, coming in at a massive €10bn ($11.2bn).
Little is known about the capacity or capabilities of the battery manufacturing facility, however German media has mooted the town Salzgitter in the German state of Lower Saxony as a likely location.
Such large factories are important for any car manufacturer looking to produce mass-market EVs. Currently, battery prices remain high, resulting in these cars being significantly more expensive than their gasoline-powered counterparts.
Companies like VW and Tesla clearly believe that through economies of scale battery prices can be reduced, thus making EVs affordable to the general public.
Ambitious sales targets
Alongside reports of this massive new factory, Volkswagen itself has announced ambitious new targets for the sale of EVs over the coming decade.
According to reporting by Automotive News, the company aims to sell 1 million electrified vehicles per year by 2025. These sales would be made up of both fully electric vehicles as well as plug-in hybrids.
Such a target is indeed ambitious, given that current VW EV sales number in the low tens of thousands per year. In order to achieve this sales increase, the company plans to release 20 new electric vehicle designs by 2020, across not only its VW brand but also Audi and Porsche.
The reported new multi-billion Euro factory will clearly play a central role in providing the battery packs for this new range.
Such a pivot towards EVs comes on the back of the so-called ‘dieselgate’ scandal which significantly hurt VW’s brand as a leader in efficiency and environmental protection.
Through pushing ahead with this new technology, the company likely hopes to regain its reputation for innovation and refresh its environmental credentials.
Despite this, it faces an uphill battle, with large companies like Tesla, Toyota and Nissan already established in this market.