Volkswagen Group’s battery company PowerCo and Umicore announced on Monday a 50-50 joint venture to produce battery materials in Europe, Kallanish reports.

The partners plan to invest €3 billion ($2.9 billion) to reach 160 gigawatt-hours production capacity by decade-end. First production, slated for 2025, will supply PowerCo’s Salzgitter factory. Capacity is expected to ramp up to 40 GWh in 2026.

The JV, which remains subject to regulatory approvals, will be headquartered in Belgium. A site location for the precursor and cathode materials plant is yet to be defined. The deal also include collaboration on sustainable procurement of raw materials, and at a later stage, refining and battery recycling.

VW Group’s technology head and PowerCo chairman, Thomas Schmall, notes cathode material is an “indispensable strategic resource for battery production,” accounting for around 50% of overall cell value.

“Immediate and long-term access to extensive capacity is thus a very clear competitive advantage,” he adds.  

“This partnership further strengthens and diversifies our exposure to a major player in the EV value chain,” comments Umicore’s ceo Mathias Miedreich.

At full capacity, the JV should cover materials demand of 2 million EVs/year at “optimal costs” under take-or-pay contracts, benefiting both companies.