- Volkswagen’s PowerCo and China’s Gotion are planning three joint ventures covering LFP cells in Spain and Slovakia and cathode material in Morocco.
- Associated investment is estimated at €3.22 billion, with 37.5 GWh of combined cell capacity and 100,000 tonnes of annual cathode material capacity.
- The structure localises manufacturing but embeds Chinese technology and capital within Europe’s battery supply chain.
Volkswagen and Gotion High-tech are planning a €3.22 billion battery alliance spanning Spain, Slovakia and Morocco, deepening European dependence on Chinese expertise even as policymakers seek to build a more autonomous battery industry.
The companies will create three joint ventures producing lithium iron phosphate cells and cathode active material. The largest will take control of PowerCo’s factory under construction near Valencia, where the partners are targeting 29.1 GWh of annual cell capacity. PowerCo will retain a 51% holding, with Gotion acquiring 49% for approximately €1.1 billion.
In Šurany, Slovakia, a Gotion-led venture will target 8.4 GWh of annual LFP cell capacity for electric vehicles and stationary storage. A third venture in Kenitra, Morocco, will produce as much as 100,000 tonnes of LFP cathode material annually. Gotion will own 51% of both ventures, with PowerCo taking 49%.
Gotion expects to invest approximately €1.6 billion across the projects, while PowerCo would provide about €1.62 billion, according to the Chinese company’s exchange filing. Financing will be contributed in stages, and specific Volkswagen purchase volumes remain subject to later agreements.
Thomas Schmall, Volkswagen’s board member for technology, called the agreement “a major breakthrough for both companies”, saying it would strengthen Europe’s battery industry.
Localisation, not decoupling
The investment is a significant endorsement of LFP chemistry. LFP batteries generally offer lower costs, long cycle life and strong thermal stability, although their lower energy density has historically limited their appeal in premium and long-range vehicles.
Improving performance and intense pressure to reduce EV prices are changing that calculation. Volkswagen estimates that LFP’s European market share could increase from about 10% today to between 40% and 60% by 2030. It says Europe currently has no meaningful domestic LFP production capacity.
The joint ventures offer Volkswagen access to proven technology, manufacturing experience and shared capital at a time when European battery projects have encountered delays, cancellations and weak returns. Morocco also provides a lower-cost location for upstream materials production with established trade links to Europe.
The arrangement does not amount to supply chain independence from China. Gotion remains the technology and industrial partner, and the ventures extend its physical presence into European production. The European Commission estimates that China accounted for roughly 83% of global battery manufacturing capacity in 2024 and supplied €22 billion of the EU’s €28 billion battery imports.
Volkswagen is separately selling a 5.3% stake in Gotion, reportedly reducing its economic interest to around 19%. The companies say Volkswagen’s exercised voting rights and board representation will be unaffected. The combination of an equity sale with deeper operating partnerships suggests VW is reducing balance sheet exposure while preserving strategic influence.
Important details remain unresolved. The transactions require shareholder and regulatory approvals, while the 29.1 GWh Valencia figure is below the 40 GWh previously associated with the site. Construction schedules, binding offtake volumes and final financing arrangements are not yet complete.
For the UK, the emerging Spain-Slovakia-Morocco corridor is a warning. The Faraday Institution’s Gigafactory Commission estimates that Britain could require around 130 GWh of annual battery supply by 2035, against only 31 GWh of firmly committed domestic capacity.
Competing will require more than subsidy for isolated factories. Volkswagen’s model combines vehicle demand, cell manufacturing, materials production, technology transfer and long-term corporate relationships. The UK needs an equally integrated proposition if it is to retain mass-market automotive manufacturing as LFP becomes the chemistry of choice for affordable electric vehicles.
