September 13, 2017 / 10:46 AM / 3 years ago

Europe needs to raise its game in car batteries: VW brand chief

FRANKFURT (Reuters) - Volkswagen (VOWG_p.DE) wants German and European industry to come together to help create a regional supplier of electric car batteries to provide competition to Asian manufacturers, the head of its core autos division told Reuters.

A photographer takes a picture of a Volkswagen logo before the opening of the Frankfurt Motor Show (IAA) in Frankfurt, Germany September 11, 2017. REUTERS/Kai Pfaffenbach

Europe’s largest carmaker and German rival Daimler (DAIGn.DE) became the latest manufacturers this week to announce plans to speed up their shift to zero-emissions motoring.

Volkswagen (VW) now aims to have 80 electric models by 2025, and says it will need four times the capacity of U.S. electric carmaker Tesla’s (TSLA.O) “gigafactory” to supply their batteries.

While European companies assemble battery packs for electric cars, the region has no significant player in battery cells - the essential building blocks for the batteries that are currently mostly manufactured in Asia.

“It would be desirable for the German and European industry to play a stronger role here,” VW brand Chief Executive Herbert Diess said. He declined to be more specific, but engineering and technology firms are likely to be most interested in the sector.

His comments came after Europe’s auto suppliers association warned a fixation on electric cars risked damaging its industry because of Asia’s dominance in battery technology.

Assembly of electric car content including battery cells will become one of the major growth areas in the coming decades, Diess said in an interview at the Frankfurt auto show.

He left open whether VW, which buys its battery cells from South Korea’s LG Chem (051910.KS) and Samsung (005930.KS), would join a potential European consortium.

“For the initial phase, I still feel in good hands with the Korean suppliers, but I would appreciate if competition were to grow and a European consortium would emerge,” Diess said.

VW’s namesake brand, its largest division by sales, will spend 6 billion euros ($7.2 billion) through 2022 on its electric car program which will be based on the new MEB platform underpinning over 20 purely battery-powered models.

Growing investment in electric cars will not undermine profitability as the brand is pursuing cost savings and cutting jobs as agreed with unions last year.

As a result, the VW brand is sticking to targets for an operating margin of at least 4 percent by 2020 and 6 percent by 2025, compared with 1.8 percent last year, Diess said.

“With this we generate just about enough cash to shoulder the investments, but have actually very little leeway,” he said. “We cannot afford to make many mistakes.”

Editing by Christoph Steitz and Mark Potter

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