Volkswagen Group, its battery subsidiary PowerCo SE, and Chinese battery manufacturer Gotion High-tech are expanding their strategic partnership with plans to establish three joint ventures focused on lithium iron phosphate (LFP) battery production in Europe and North Africa.
The agreement covers battery cell manufacturing in Valencia, Spain, and Šurany, Slovakia, alongside a new LFP cathode material production facility in Kenitra, Morocco. The initiative aims to strengthen Europe’s battery supply chain, reduce dependence on external suppliers, and support the growing demand for more affordable electric vehicles.
The companies have worked together since 2020, with Gotion serving as both a battery cell supplier to Volkswagen Group and a strategic partner of PowerCo. The expanded cooperation will extend their relationship into industrial production, joint procurement, and sales activities across Europe.
Why Volkswagen Is Expanding LFP Battery Production
LFP batteries are becoming increasingly important to the electric vehicle industry because of their competitive production costs, long service life, and robust performance. Compared with some other lithium-ion battery chemistries, they offer a cost-effective solution for mass-market electric cars.
According to forecasts cited by the companies, LFP batteries could increase their share of the European battery market from approximately 10% today to between 40% and 60% by 2030.
Despite the expected growth, Europe currently lacks significant dedicated LFP battery production capacity. Expanding manufacturing in the region could help automakers secure battery supplies, improve cost competitiveness, and reduce exposure to supply chain disruptions.
The Volkswagen-PowerCo-Gotion partnership is designed to address this gap by establishing a more integrated regional supply chain, spanning cathode materials and battery cell production.
Thomas Schmall, Volkswagen Group’s Board Member for Technology and Chairman of PowerCo’s Supervisory Board, said the expanded partnership represents an important step toward strengthening Europe’s battery industry. He also highlighted Volkswagen’s ambition to cover the battery value chain, from development and cathode materials to manufacturing.
PowerCo CEO Frank Blome described the agreement as another milestone in building Europe’s battery industry, emphasizing the importance of supply chain resilience and faster industrialization.
Three Joint Ventures Across Three Locations
The planned joint ventures will divide production responsibilities between Spain, Slovakia, and Morocco, with each location playing a specific role in the emerging battery supply chain.
Valencia, Spain: LFP Battery Cell Production
Volkswagen’s PowerCo battery factory under construction in Valencia is expected to be transferred to a joint venture between PowerCo and Gotion.
PowerCo will hold a 51% majority stake, while Gotion will own the remaining 49%. Both companies intend to manage the operation jointly.
One of the facility’s main objectives is to establish Valencia as a European production hub for Volkswagen’s Unified Cells using LFP technology. These batteries are expected to support more cost-effective electric vehicles, particularly in the high-volume market segment.
The previously announced investment and job creation plans for the Valencia facility are expected to remain unchanged.
Šurany, Slovakia: Batteries for EVs and Energy Storage
The second joint venture will focus on LFP battery cell production at Gotion’s planned factory in Šurany, Slovakia.
Under the proposed ownership structure, Gotion will hold a 51% majority stake, with PowerCo owning 49%. The companies intend to manage the operation together.
The facility is expected to manufacture LFP cells for electric vehicles as well as energy storage systems. This broader focus could help meet demand from both the automotive industry and the growing market for stationary battery storage.
The Slovakian project will also give PowerCo a direct stake in another regional battery manufacturing operation, complementing its activities in Spain.
Kenitra, Morocco: LFP Cathode Materials
The third joint venture will establish a new production facility in Kenitra, Morocco, dedicated to cathode materials used in LFP batteries.
Gotion will hold a 51% majority stake, while PowerCo will own the remaining 49%. Both companies will jointly manage the venture.
Cathode materials are essential components of lithium-ion batteries, and securing their supply is an important part of building a resilient battery industry.
By adding production capacity in Morocco, the partners aim to diversify their sources of key materials, strengthen supply security, and expand the regional value chain supporting European battery manufacturing.
Together, the three locations are intended to create a more integrated industrial network for LFP batteries, connecting materials production with battery cell manufacturing.
Volkswagen and PowerCo Outline Their Investment Commitments
The agreement includes substantial financial commitments from both companies, reflecting the scale of their planned industrial cooperation.
PowerCo is expected to contribute approximately €470 million by 2030 to acquire its 49% stakes in the Šurany and Kenitra joint ventures.
In return, Gotion plans to invest approximately €1.1 billion to acquire a 49% stake in the Valencia joint venture, where PowerCo will retain majority ownership.
The investments are intended to distribute financial commitments and industrial responsibilities across the three facilities while supporting the partners’ long-term production plans.
However, the agreements remain subject to regulatory approvals and customary closing conditions. Approval from Gotion’s shareholders is also required.
Volkswagen to Sell Part of Its Stake in Gotion
Alongside the expanded industrial partnership, Volkswagen Group has entered into definitive agreements to sell a 5.3% equity stake in Gotion through its subsidiary, Volkswagen (China) Investment Co., Ltd.
The transaction is intended to optimize Volkswagen’s shareholding structure while preserving the long-term strategic relationship between the two companies.
Volkswagen previously agreed not to exercise voting rights for part of its shareholding in Gotion. According to the announcement, the planned sale will not reduce the voting rights in Gotion exercised by Volkswagen Group.
The transaction will also leave Volkswagen’s board representation and other nomination rights at Gotion unchanged. Following completion, Volkswagen will remain a significant strategic investor in the Chinese battery manufacturer.
The sale remains subject to the necessary regulatory clearances.
What the Partnership Means for the European EV Market
The expanded cooperation comes as automakers face increasing pressure to reduce electric vehicle costs while securing reliable supplies of critical battery components.
LFP batteries are particularly relevant to more affordable electric cars because their chemistry can offer a lower-cost alternative to nickel-rich battery technologies. Their growing adoption could help manufacturers introduce competitively priced EVs without relying exclusively on higher-cost battery chemistries.
For Volkswagen, the partnership provides a route to expand LFP production through PowerCo while working with an established battery technology partner. For Gotion, it creates additional opportunities to expand its industrial presence in Europe and strengthen its international business.
The three planned facilities could also help reduce Europe’s reliance on imported LFP cells and cathode materials, although the impact will depend on how quickly the projects are completed and how much production capacity they ultimately deliver.
The agreement does not mean Europe will immediately become self-sufficient in LFP batteries. However, establishing regional manufacturing and diversifying material supplies are important steps toward a more resilient battery industry.
With LFP demand expected to rise significantly by 2030, the Volkswagen-PowerCo-Gotion partnership could become an important part of Europe’s efforts to build a competitive battery supply chain and make electric mobility more affordable.
