Some experts predict that by 2040, electric vehicles will account for 58% of new car sales, and automakers are eager to catch up. BYD, Tesla and  China Great Wall Industry Corporation (CGWIC) are still the only car manufacturers fully integrated into battery production, and global car manufacturers are now seeing the wisdom of their business models and integrating them into batteries. Out of concern about the supply chain, especially after the outbreak of covid-19, automakers are also localizing their supply chain to bring battery production closer to their assembly business. By investing in battery companies in China, Europe and the United States, vwagy has been the most active in integrating and localizing battery production.

In late May, Volkswagen announced that it would acquire a 26% stake in Gotion High-Tech Co. (002074.SZ), China’s fourth largest battery producer, for about €1.0 billion and become the battery maker’s largest shareholder. In 2020, Gotion sold 2.3 GWh of batteries and ranked eighth in the world, just ahead of Korea’s SK Innovation. Betting heavily on the development of China’s EV industry, Volkswagen announced at the same time that it would invest an additional €1 billion to increase its stake in JAC Volkswagen from 50% to 75%, and to acquire 50% of JAG, the parent company of its Chinese partner in JAC.

Also in May, Volkswagen announced that it would invest €450 million into a new battery plant located in Salzgitter, Germany, in partnership with Swedish battery producer Northvolt AB. When it begins operations in early 2024, the Salzgitter facility will have 16 GWh of capacity. In its announcement, Volkswagen said that it is “optimizing the Volkswagen Group’s strategic position in the key future field of batteries. In addition to a very secure supply base with external producers, we are also systematically building up further capacities.”

Finally, in order to stay abreast of new developments in battery technology, Volkswagen announced in June that it will invest an additional $200 million in QuantumScape Corporation (QS), a U.S. based developer of solid state batteries, bringing its total investment in the company to $300 million. Volkswagen believes that solid-state batteries will significantly increase range and shorten charging times in the future, and has also established a 50-50 joint venture with QuantumScape to enable industrial-level production of this next generation of batteries.

Volkswagen is not alone among the legacy carmakers to invest in battery technology and production. In July, Daimler AG (DAIGn.D) said that it would invest $480 in the initial public offering of Farasis Energy (Gan Zhou) Co. (688567.SS) for a 3% stake in the company. Farasis is the seventh largest battery producer in China and will supply Daimler with lithium-ion battery cells from its factories in China and a factory which it is building in Germany.

In the United States, General Motors and LG Chem (051910.KS) announced late in 2019 that the two companies will invest up to $2.3 billion in a joint venture to produce battery cells in the Lordstown area of Ohio. Apart from its cooperation with LG Chem, GM is also developing its own battery technology. At an “EV Day” in March, GM outlined its aggressive plans for an electric future and unveiled an innovative modular propulsion system, powered by its proprietary “Ultium” batteries.

In China, Geely Automobile Holdings (HK.0175) committed to electrifying its fleet as early as 2015 and is now focused on the powertrain. In June 2019, Geely announced a new 50-50 joint venture with LG Chem, capitalized with $188 million of Registered Capital, to produce batteries in China. On December 25, just as 2020 was drawing to a close, Geely’s founder said that a company under his control would cooperate  with Farasis to set up a joint venture to supply batteries to Geely’s commercial vehicle unit. The capacity of the new venture will ultimately be 120 GWh, with construction of 20 GWh of capacity to begin in 2021.

Meanwhile, other Chinese automakers are completing joint ventures with Contemporary Amperex Technology Co. (CATL), China’s largest battery company, in order to ensure a supply of batteries.

With the transformation of the automobile industry, it is time for the market to reshuffle. No automobile manufacturer is willing not to participate in the reshuffle or has no seat at the table where the cake is redistributed.