Volkswagen Group has signed an MoU for the long-term supply of lithium for battery cells with lithium producer Ganfeng Lithium

The agreement establishes that Ganfeng will supply Volkswagen Group and its suppliers for 10 years.

The companies did not specify volumes, agreed price or time-frame, but it is understood by Fastmarkets that the likes of Volkswagen typically purchases lithium compounds below the market price.

Fastmarkets’ assessment of the Chinese domestic spot battery-grade lithium carbonate price (min 99.5% Li2CO3) was at 70,000-78,000 yuan ($10,421-11,621) per tonne on a China ex-works basis on Thursday April 4, down from 72,000-80,000 yuan per tonne the previous week.

Meanwhile, the battery-grade lithium hydroxide monohydrate (min 56.5% LiOH.H2O) price was assessed at 93,000-98,000 yuan per tonne on a China ex-works basis on Thursday, unchanged from the previous week.

Ganfeng and Volkswagen have also agreed to cooperate on future endeavors such as battery recycling and solid-state batteries.

Volkswagen Group has a goal to produce 22 million electric vehicles (EVs) worldwide by 2028 at the Group’s e-platform - the plant where vehicles are manufactured - so it is essential to secure access to the battery raw materials market.

“Over the next 10 years the Volkswagen Group will be launching 70+ new pure EVs. That means approximately a quarter of the vehicles we deliver in 2025 will be powered by electricity. Consequently, there will be a rapid increase in our raw material demand for cell production in the coming years,” Stefan Sommer, Volkswagen Aktiengesellschaft’s Group board member for components and procurement said.

“We must make sure we cover this demand at an early stage. Long-term agreements like the one for lithium, a key raw material, that we have just concluded with Ganfeng are therefore of crucial strategic significance for implementing our electric offensive,” Sommer added.

In the near future, lithium will be one of the most sought-after raw materials on earth due to the unrivaled charge carrier feature that will be irreplaceable for the foreseeable future, according to Volkswagen, where no other element offers comparable properties for automotive battery applications.

Volkswagen expects to start a small-scale production of solid cells by 2025 and to establish a battery recycling facility in Salzgitter by the end of 2019.

Volkswagen is the second German automaker to secure a lithium supply agreement with Ganfeng.

On September 28 of 2018, Gangfeng reached a lithium-supply agreement with BMW and now also holds agreements with LG Chem and Tesla.