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Driving Change

Car companies are now battery companies

German automaker Volkswagen is making a big play, as is General Motors. Is Tesla watching the rear-view mirror?

Volkswagen Power Day

Volkswagen executives during its virtual Power Day briefing event in early March.

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Battery technology will decide the winners and losers of tomorrow's auto industry.

If you think that's a dramatic statement, just check out German auto giant Volkswagen's two-hour event "Power Day," which kicked off Monday morning. It was a Tesla-style deep (deep!) dive into Volkswagen's global plans for battery chemistry development and manufacturing.

"Our goal is to establish a pole position in the global scaling of batteries," said Volkswagen CEO Herbert Diess to kick off the show, which featured a battery-nerd's delight of schematics of charging anodes and cathodes, cutouts of battery cells and blueprints of future battery factories.

It wasn't always so. Historically, automakers have spent the bulk of their efforts designing and manufacturing just the vehicles themselves and left the issue of the power supply to the gasoline and diesel fuel providers.

Our goal is to establish a pole position in the global scaling of batteries.

But as more automakers make commitments to shift their entire businesses eventually over to electric vehicles, many are also increasingly investing in the chemistry and manufacturing of their own power supplies, i.e. the battery. At the Consumer Electronics Show earlier this year, General Motors also spent considerable time during a keynote presentation digging into the technical aspects of battery chemistry and development. 

Tesla was the first automaker to start doing this years ago through its core partnership with Panasonic and its investment into a battery "gigafactory" in Nevada and later elsewhere. Tesla's playbook could be seen throughout the Volkswagen event — from the German company's use of the word "gigafactory" to its battery-cell-pack architecture. 

It's not a surprise that Volkswagen is following suit. Following the diesel emissions scandal, the company pledged to electrify its entire lineup and has said it will stop developing combustion platforms after 2026. Last year, Volkswagen delivered 134,000 all-electric vehicles from its ID lineup, a 197 percent increase from the year before.

Volkswagen is actually in a better position than Tesla was years ago — with its hodgepodge of Silicon Valley funding, government loans and the CEO's personal investments — to make such a big move into batteries. Volkswagen generates hundreds of billions of dollars a year in internal combustion vehicle sales, and battery manufacturing is a capital-intensive business. 

At Power Day, Volkswagen highlighted a few key partnerships it hopes will help it get to where it wants to go with batteries. Those battery partners include Northvolt, a Swedish battery manufacturer, and QuantumScape, a Silicon Valley battery developer.

On Monday, Northvolt revealed a $14 billion battery order from Volkswagen over the next 10 years. That's huge, particularly considering Northvolt is essentially a startup. 

And it's proof Volkswagen won't be able to make this colossal electric transformation on its own. It'll need to invest in as much external innovation as it can find across the globe. Collaborating with these types of new, and high-risk, companies will be challenging.

But there's no turning back now. As Volkswagen's CEO put it to kick off Power Day: "E-mobility has won the race." 

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