Chinese company Gotion High-Tech has approved the signing of an investment agreement with the Volkswagen Group, which will establish a joint venture to produce lithium batteries and cathode materials. Under the agreement, the new joint venture will be responsible for investing in the construction of a battery production facility in Sagunto (Valencia).

The Valencia gigafactory will have an annual production capacity of 29.1 gigawatt-hours and represent a total investment of approximately €2.262 billion. Gotion will make its contribution through a capital increase in PowerCo Spain, after which the Chinese company will hold a 49% equity stake, with PowerCo holding the remaining 51%. Under this ownership structure, Gotion’s investment will exceed €1.1 billion.

European supply chain
Through this joint investment, Gotion will help build the Volkswagen Group’s flagship battery cell plant in Europe. PowerCo will for its part acquire a stake in two other Gotion battery and materials projects in Slovakia and Morocco, through which they aim to develop a regional supply chain for Europe-bound batteries.

One of the agreement’s main objectives is to transform the plant, already under construction, into a European production centre for unified cells based on LFP technology. PowerCo and Gotion will  manage the joint venture. The Chinese company’s investment commitment reflects the scale and strategic importance of this European production facility. The investments will be made in phases.

Production capacity
LFP (lithium iron phosphate) batteries offer competitive costs, a long service life and outstanding durability, making them a key technology for affordable electric mobility. The deal addresses a need in the European market, which currently lacks significant production capacity for this type of battery.

PowerCo CEO Frank Blome says, “Volkswagen and PowerCo are building Europe’s battery industry. Our collaboration with Gotion marks the next milestone on this journey: it strengthens the resilience of our value chain, accelerates industrialisation and combines PowerCo’s capabilities with the strengths of a partner with a long track record.”

The transaction is subject to approval by Gotion High-Tech’s general meeting of shareholders and competition authorities in both countries.

^{Photo: Gotion}