Volvo Signs Multi-billion Dollar Battery Deal With CATL And LG

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The electric car craze is causing a battery shortage that poses a significant challenge for many automakers’ plans to fast track models for rapid production.

  • While many EV manufacturers are worried about sourcing batteries, Volvo has signed a long term deal with China’s CATL and Korea’s LG Chem.
  • Volvo is planning on 50% of its global sales to be electric vehicles by 2025, which underscores the importance of this deal.
  • Volvo will introduce a fully electric XC40 SUV later this year and Polestar, it’s all EV brand following in 2020.

Thankfully, Volvo appears to have overcome this hurdle via a recently-signed, long term, multi-billion-dollar battery supply deal with both Chinese battery manufacturer CATL and the South Korean firm LG Chem.  The contract will supply Volvo with coveted lithium-ion batteries over the coming decade for next-generation Volvo and Polestar models.

The terms of this deal are particularly good for Volvo, as the agreements cover the global supply of battery modules for all models on their upcoming SPA2 and existing CMA modular vehicle platforms. This news represents a major step towards realizing Volvo Cars’ ambitious electrification strategy.

Volvo made a commitment in 2017 that all new vehicles launched from 2019 would be electrified in some way.  To meet these ambitious goals, it is paramount for the company to obtain reliable battery suppliers. Recently, Volvo has doubled-down on this strategy, aiming for fully electric cars to make up 50 percent of its global sales volume by 2025.

This goal will be met primarily through the expansion of their Polestar electric brand. “The future of Volvo Cars is electric and we are firmly committed to moving beyond the internal combustion engine,” said Håkan Samuelsson, president, and CEO of Volvo Cars. “Today’s agreements with CATL and LG Chem demonstrate how we will reach our ambitious electrification targets.”

Volvo cars’ have strict sourcing guidelines in terms of technology leadership, responsible supply chains, and competitive cost models. The Chinese based CATL and South Korean based LG Chem of South Korea are both renowned for producing quality batteries, and both have long and successful track records supplying lithium-ion batteries to the global automotive industry.  “With today’s agreement we effectively secured our battery supply for the upcoming decade,” said Martina Buchhauser, senior vice president for procurement at Volvo Cars. “By having two suppliers available in each region we also ensure that we have flexibility in our supply chain going forward.”

Volvo plans on launching the XC40, a small SUV, as their first electric vehicle. To that end, work is underway on the company’s first battery assembly line in Ghent, Belgium. Coincidentally or otherwise, that is also where the current plug-in hybrid variant of the XC40 is already manufactured. It should be operational by the end of 2019, when the first fully electric Volvo will be built.

In China, the battery supply will benefit from the scale of the wider Geely Group. The Compact Modular Architecture (CMA) currently underpins the XC40, as well as the fully electric Polestar 2 fastback and several models sold by LYNK & CO, Volvo’s sister brand which it co-owns with Geely. As of this year, all three models will be built on a single production line at a Volvo-operated manufacturing plant in Luqiao, China.

Volvo is working on their SPA2 architecture and that stands for the brand’s “Scalable Product Architecture” platform. This unique design architecture virtually unifies the Volvo lineup under a single platform through an innovative design that makes it scalable for its sedans, SUVs, and wagons.

Between the all-electric Polestar brand, the introduction of the all-electric XC40, and the acquisition of not one but two prominent battery manufacturing firms for their global supply chain, Volvo appears to be firmly on-track to following through on the promise of fully electric vehicles making up 50 percent of their global sales volume by 2025.

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