On May 10, the major Chinese battery supplier Gotion Hi-Tech announced that its subsidiary, Hefei Gotion, has received a procurement confirmation letter from Volkswagenwerk AG (Volkswagen). According to the letter, Gotion Hi-Tech will supply LFP battery cells for Volkswagen’s vehicles sold outside of China. Subsequently, a comprehensive adoption by Volkswagen for its various model series could take place.

Currently, Gotion Hi-Tech’s ternary and LFP battery cells have been adopted by Volkswagen for vehicles sold in Mainland China. The latest decision by Volkswagen to use Gotion Hi-Tech’s batteries in other regional markets signifies a significant step forward in this strategic partnership. Gotion Hi-Tech stated that Volkswagen's decision is a milestone in terms of the adoption of its batteries among globally recognized automotive brands.

Also, according to Gotion Hi-Tech’s announcement, the LFP battery cells that Volkswagen will be using in other regional markets are the same as the ones that it is using in Mainland China with regard to design and specifications. As for pricing, Gotion Hi-Tech stated that the LFP battery cells for foreign markets will be sold at a price aligned with the “fair market price.” The battery supplier emphasized that Volkswagen will specifically procure LFP battery cells for vehicles sold outside of China.

Gotion Hi-Tech added that this development also represents significant progress that has been made possible by making Volkswagen a major strategic investor in the company. By taking Volkswagen onboard, Gotion Hi-Tech has been able to qualify its products and ship them to international customers. With this new landmark deal, Gotion Hi-Tech now enters the next critical phase in marketing its solutions to multinational automakers. The deal will also significantly benefit the battery supplier in terms of enhancing its comprehensive competitiveness in the market for EV power batteries.

Volkswagen is currently the largest shareholder of Gotion Hi-Tech, in addition to being its most important ally in the EV market. With the further strengthening of their relationship, Volkswagen also becomes Gotion Hi-Tech's largest potential customer. On May 28, 2020, Volkswagen established an investment subsidiary in China. On the same day, Gotion Hi-Tech issued a private placement of its A-shares to raise no more than RMB 7.306 billion. Volkswagen promptly made the transaction, acquiring no less than RMB 6 billion and becoming a major shareholder with a 26% stake.

Then, in December 2021, Gotion Hi-Tech disclosed that Volkswagen had acquired more shares through another private placement. With this transaction, Volkswagen increased both its shares in the company to 441 million and its ownership of the company to 26.47%. As a result, Volkswagen became the largest shareholder.

The actual control of the company has remained with its founder and chairman Li Zhen. However, the deal in December 2021 reduced the stake owned by Li Zhen and his group to 18.17%. Li’s group is now the second-largest shareholder.

To meet the potential demand from Volkswagen, Gotion Hi-Tech initiated a manufacturing project in a hi-tech industrial development zone in Hefei, China’s Anhui Province, in July 2021. The project comprises an annual production capacity of 20GWh for batteries that meet Volkswagen’s specification standards. Then, in October 2022, Gotion Hi-Tech’s wholly-owned subsidiary, Yichun Gotion, broke ground on another manufacturing project with an annual production of 20GWh. This project is scheduled to go online in October 2023.

In early 2021, Gotion Hi-Tech received confirmation from Volkswagen that the company’s ternary and LFP battery cells would be used in Volkswagen’s vehicles sold in Mainland China. This agreement formally placed Gotion Hi-Tech in the German automotive giant’s supply chain, thus ensuring a sustained flow of orders.

The production capacity of the project in the high-tech industrial development zone of Hefei is evenly divided between ternary and LFP battery cells. Gotion Hi-Tech is also building a production hub for ternary cells specifically for Volkswagen’s vehicles in Lujiang County, which is under the administration of Hefei. The project in the high-tech industrial development zone will enter operation in the third quarter, and the hub in Lujiang, too, will enter operation within this year.

Moreover, earlier this year, Gotion Hi-Tech obtained accreditation from Volkswagen’s battery testing laboratory. This event has further boosted the battery supplier’s capability to qualify and certify its products. It also means that Gotion Hi-Tech has been integrated into the world’s leading technology management system for EV power batteries.

This article is a translation of a Chinese article posted by TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.