3.220.000.000 €, most of it in Valencia: Volkswagen’s and its Chinese partner’s key mega-investment

Volkswagen Group and the world’s seventh-largest battery manufacturer, its Chinese partner Gotion, began their partnership in 2023, but they signed a crucial agreement under which the Chinese company will supply batteries to the German group from 2026 to 2032.

The deal seems so successful that Gotion recently announced, through a statement today, a massive joint investment of 3,220,000,000 euros, with Volkswagen’s battery factory in Sagunto, Valencia, playing a key role in this initiative.

Valencia, the key factory for this massive battery investment

Sagunto, PowerCo’s battery factory in Valencia — the battery division of Volkswagen Group — will be the hub for this €3,220,000 investment. But it won’t be the only one; Volkswagen and its Chinese partner Gotion will allocate this amount over just five years not only to the Valencia factory but also to another in Slovakia and another in Morocco.

The goal in Valencia — which has already generated significant interest from Volkswagen’s Chinese partner — is to achieve an annual production capacity of 29.1 GWh for lithium batteries, accounting for the largest portion of those €3,220,000,000: nothing less than €2,260 million.

In Slovakia, meanwhile, with an investment of 480 million euros, both partners aim to establish local battery production—amounting to 8.4 GWh per year—for Volkswagen Group’s new electric cars in Europe: we’ve already tested the CUPRA Raval, which you should buy, as well as the practical Skoda Epiq.

However, in Morocco, another 480 million euros of this massive investment will be used to build a factory for processing iron phosphate and lithium cathode materials. With an expected capacity of 100,000 tons per year, it will export these materials to the factories in Valencia and Slovakia.

The details of this major investment by Volkswagen and its partner

3,220,000,000 euros is certainly a substantial amount. This five-year major investment will be carried out jointly by Volkswagen Group, which will contribute 1,620 million euros, and its Chinese partner Gotion, which will provide the remaining 1,600 million euros.

From a purely business perspective, both partners plan to establish three joint companies for these projects, which they will set up through their subsidiaries in Spain, Morocco, and Slovakia, according to Gotion’s statement.

Thus, regarding the key factory in Valencia, Gotion plans to acquire a 49% stake in PowerCo following a capital increase, but Volkswagen Group’s battery company will retain control of the Sagunto facilities, which it considers strategic.

The approach used in Valencia will not be applied in Slovakia or Morocco, where Gotion will obtain a 51% stake in both facilities.

According to Chinese media, this massive investment will further strengthen ties between Volkswagen Group and its Chinese partner, of which the world’s second-largest automaker already holds a 24.8% stake, making it the main shareholder.

Although Gotion’s board of directors approved this megainvestment proposal on September 28th, the two companies have yet to sign the investment agreement. This key project for both in Europe still requires approval from shareholders and government approvals, both in China and Germany.