PowerCo, the new company in charge of batteries for the VW Group

The Volkswagen Group announced Thursday the creation of a new company, PowerCo, to handle the automaker's future global battery activities.

The announcement coincided with the start of construction of VW Group's first battery cell production plant, located in Salzgitter, Germany. Salzgitter is the location where VW Group opened its battery cell R&D center in 2019.

"The battery cell business is one of the cornerstones of our New Auto strategy to make Volkswagen a leading provider of tomorrow's sustainable software-driven mobility," VW Group CEO Herbert Diess said in a statement.

PowerCo will be responsible for activities along the entire battery value chain, including battery cell production at Salzgitter and other locations; PowerCo expects to invest more than 20 billion euros (about $20.25 billion) by 2030, with eventual sales of that amount annually.

The Salzgitter plant is scheduled to open in 2025. According to PowerCo, the VW Group is planning five more battery cell plants in Europe and possibly in North America with partners such as Sweden's Northvolt. There is a possibility that the company will also build a plant in North America, possibly with partners such as Northvolt of Sweden.

The next location has been identified as Valencia, Spain, close to where VW Group plans to produce future subcompact EVs. The six European plants are expected to supply 240 gwh per year, and these cells will be used not only for vehicle batteries, but also for energy storage systems, including those for the energy grid.

The VW Group's new automotive strategy calls for the use of common cells in about 80% of the automaker's lineup in order to reduce battery costs; VW expects to be able to reduce battery costs by up to 50% with the use of these common cells. Production of the common cells is scheduled to begin in 2025; according to the VW Group, prototypes are already showing promising performance with respect to range, charging, and safety.

For some applications, such as high-performance vehicles, there will remain proprietary cell designs that VW Group will develop with its partners. Porsche, a VW Group brand, is taking the lead in this regard.

The VW Group is also developing a solid-state battery. The automaker expects to introduce the first solid-state batteries after 2025. VW Group plans to introduce the first solid-state batteries after 2025.