Volkswagen is relocating to protect long-lasting supplies of cobalt, an important component of rechargeable batteries, as the group speeds up its enthusiastic shift to electric cars.
Cobalt industry sources told Reuters that the automaker, has asked producers to send proposals on providing the product for as much as 10 years from 2019.
Volkswagen, which chose the strategic shift to electric vehicles (EVs) prepares to invest over 20 billion euros ($ 24 billion) in zero-emission vehicles by 2030 to challenge pioneer Tesla in producing a mass market.
The company, which intends to make approximately three million EVs a year by 2025, wants all the cobalt tender proposals submitted by the end of September. “The tender does not tell you just how much cobalt they want. They tell you the number of EVs they want to make, you need to work out the cobalt material yourself,” one cobalt industry source stated.
Volkswagen did not respond to Reuters questions on the details of the tender however noted that the group would require over 150 gigawatt hours of battery capability every year by 2025 for its electric vehicles.
This would indicate major purchases of essential materials. “The procurement task is one of the largest in the history of the vehicle industry, with a total order volume of over 50 billion euros,” it stated. “That will fulfill the Group’s needs for the first wave of e-mobility.”
Demand for cobalt is anticipated to skyrocket in the coming years because of the electric vehicle revolution as governments across the world punish pollution. Volkswagen is under specific pressure as it had been slow to embrace electric vehicles and self-driving technology until two years ago.
Battery and vehicle makers have to sign multi-year deals to secure supplies of raw materials consisting of cobalt and lithium.
The Democratic Republic of Congo (DRC) produces approximately 65 percent of the world’s cobalt supplies estimated at around 100,000 tonnes this year. Canada, China, Russia, Australia and Zambia are likewise significant sources.
At the company level, the industry is dominated by Glencore, which produced over 28,000 tonnes in 2016.
Reuters recently reported that Glencore had actually signed a significant deal to sell up to 20,000 tonnes of cobalt products to a Chinese company, a move that would help Volkswagen secure automobile batteries for its shift to electric vehicles.