Volkswagen, the latest European automaker to bring battery supplies closer to home in the shift to electric vehicles, announced on Monday a $2.9 billion joint venture with Belgian materials company Umicore.

While the majority of the raw materials, such as lithium, cobalt, nickel, and manganese, will still be sourced from around the world, the joint venture will focus on producing cathodes for batteries in Europe, most likely at Umicore’s Polish plant.

The companies involved in the venture, Umicore and Volkswagen’s battery division PowerCo, said they also planned to work together on recycling metals from battery materials but did not specify when.

As political pressure grows to bring the supply chain, currently dominated by Asian players, closer to home, Europe’s automakers are rushing to secure stakes in the expanding number of plants on the continent that are converting raw materials into batteries.

By 2030, Volkswagen wants to sell 70 per cent of its cars in Europe as fully electric vehicles. To protect its supply chains from geopolitical unrest and cut down on transportation expenses, Volkswagen is increasingly attempting to fence off its supply chains by region.

However, the European battery industry is still in its infancy. Efforts to mine raw materials in nations ranging from Germany to Portugal have been hampered by bureaucracy, and recycling facilities are unable to expand on a large scale without the availability of raw materials.

Umicore will produce enough battery precursor and cathode material under the 3 billion euro ($2.9 billion) joint venture, which the companies announced in December, to power 160 gigawatt hours (GWh) of batteries, or 2.2 million vehicles.

At Volkswagen’s first battery plant in Salzgitter, Germany, construction will begin with materials for 40 GWh of capacity by 2026. By 2030, the automaker hopes to have six battery factories in Europe with a combined capacity of 240 GWh.

According to Umicore CEO Mathias Miedreich, there is a “strong industrial logic” to locating production at the company’s recently opened battery materials plant in Nysa, Poland. He also said a decision would be made “rather quickly.”

The plant, which started producing in July, could potentially be expanded to have a capacity of more than 200 GWh by the end of the decade, which would be sufficient to power about three million electric vehicles. View More

Also agreed upon by the parties was Umicore’s refinement of cathode material for the initial 60 GWh of capacity.

After the Belgian company announced a 5 billion euro plan to expand its battery material business, shares in the company crashed in June. Analysts were worried about the increased debt and external funding needed amid rising costs.

(Adapted from USNews.com)