XC90 Recharge T8 AWD. Image © Volvo Car Group
A multibillion dollar deal has been signed between Swedish car maker Volvo and two Asian electric car battery producers, LG Chem and Contemporary Amperex Technology Co Ltd (CATL), to supply the firm until 2028.
The announcement is the latest in a series of deals between global carmakers and Asian battery companies. Between them, the major auto manufacturers are planning to invest around €270-billion on electric vehicles and the associated technology over the next decade.
Carmakers value long-term battery supply agreements highly as they help to clear supply bottlenecks when demand is high and keep the costs lower for longer.
Volvo alone has said it will invest around 5% of its annual revenue, which amounts to just over €900-million, in driverless and electric cars.
The move is part of Volvo's continues push towards a 50% EV sales target by 2025. The company has already stated that every new model from 2019 would contain electric or hybrid technology. Plans are in the works for the its first full-battery vehicle, which would be an electric version of the XC40 SUV.
“The future of Volvo Cars is electric and we are firmly committed to moving beyond the internal combustion engine,” Volvo Cars President and CEO Hakan Samuelsson.
By using LG Chem and CATL, Volvo not only has flexibility in choice of supplier, but also is able to sidestep any tariffs that may be imposed on Chinese products as a result of the ongoing trade war with the US.
Volvo has said it plans to use batteries from both companies in all major regions and across the range of models.
Currently Volvo uses LG Chem batteries for its hybrids, which accounts for around 10% of sales.
The deal will see both LG Chem and CATL supply batteries to Volvo, assembling them at the group's facilities. Carmakers usually want the vehicles and batteries which power them to be made close to one another due to the weight and cost of transportation.
The battery assembly line at the Volvo facility in Ghent, Belgium, where the CX40 will be built, is already being constructed.
Volvo will also use the supplied batteries in its Polestar electric sub-brand which was launched last year.
Since the deal with Volvo was announced, shares in both LG Chem and CATL have gone up by over 3%.
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