VWâs PowerCo Speeds Up EV Shift with Battery Innovation
Volkswagen is making significant strides in the transition to EVs and a key element of the shift is its decision to integrate its battery value chain vertically.
Its route to achieving this was establishing PowerCo in 2022, a dedicated battery company focused on the development and production of high-quality battery cells across the Volkswagen Group.
Andreas Eckle, CIO of PowerCo SE, states: "PowerCo will develop and produce large numbers of battery cells for the VW Group of the best quality. The gigafactories are set up to a standard factory design."
The approach ensures consistent processes, equipment and workflows across all locations, enabling greater efficiency and scalability.
Gigafactories: Scaling battery production
Volkswagen is currently constructing three gigafactories to support its EV production.
The first, located in Salzgitter, Germanyâaround 70 kilometres from Hannoverâserves as the blueprint for future PowerCo plants. Cell production at the facility is scheduled to begin in 2025.
Additional gigafactories in Valencia, Spain, and St. Thomas, Canada, are in the pipeline.
Once fully operational, the Salzgitter facility will achieve an annual capacity of up to 40 GWhâsufficient to power approximately 500,000 EVs. The three gigafactories in Europe and North America will produce up to 200 GWh of battery cells.
A new industry for Volkswagen
Producing battery cells represents an entirely new business model for Volkswagen.
"It is not manufacturing cars anymore; it is chemistry," Andreas explains. "We go all the way from mining to the complete cell and recycling."
Sustainability is a major focus for PowerCo, ensuring that the entire supply chain aligns with Volkswagen's environmental and ethical standards. The commitment includes developing new business models centred around reusing and recycling EV batteries.
Establishing PowerCo meant building new factories and a skilled workforce. Over the past 24 months, Volkswagen has recruited approximately 1,500 research, development and operations employees to support the initiative. Setting up the IT infrastructure to manage these operations was a critical step in its transformation.
Standardised processes for speed and efficiency
Volkswagen's push for standardisation has been crucial in expediting PowerCo's development.
"We have a very high demand that we need to satisfy for electric vehicles and, from our understanding, this will only work if we have the right standards in place," Andreas continues.
Stephan Fester, Global Battery Best Practice lead at SAP, echoes his sentiment: "Without standards, you will never have the performance you need to set up a factory at this scale in no time."
SAP has been a key partner in PowerCo's rapid development, implementing cloud-based enterprise resource planning (ERP) systems to streamline operations.
SAP's role in fast-tracking implementation
Volkswagen and SAP collaborated to launch an SAP S/4HANA Cloud system, ensuring PowerCo had the tools to manage finances, workforce and procurement from the outset. The implementation was completed in record time.
"The first initiative was to manage and spend money and recruit, employ, and manage people," Stephen expands. "Normally, this process takes 12 weeks. However, PowerCo challenged us to complete it in just five weeks."
By mid-2023, PowerCo had successfully implemented logistics management systems, aligning factory setup with IT requirements, allowing seamless integration of material handling, warehousing and vendor management. Enhanced logistics capabilities, including in-warehouse processes and returnable packaging management, were introduced in late 2023.
"We set up a cloud ERP system in less than six months, fully operational," Stephen goes on. Andreas highlighted that the project's success stemmed from quick decision-making and an effective task force approach to resolving issues.
The SAP S/4HANA implementation was recognised with an SAP Quality Award in 2024, highlighting the project's efficiency and innovation.
"We are proud of what we have achieved," Andreas says, "but we still have a long way to go. The Salzgitter factory opening is the first major milestone, with two other openings following."
PowerCo's prospects
With its cloud ERP system now serving as the backbone of operations, PowerCo is well-positioned to support Volkswagen's broader EV strategy. Beyond cell production, the company aims to expand into battery recycling and energy storage solutions, further enhancing Volkswagen's sustainable business model.
As the automotive industry continues to shift towards electrification, Volkswagen's strategic focus on battery production places it at the forefront of the EV revolution. Vertically integrating its battery value chain ensures long-term competitiveness and sustainability in an increasingly electrified world.
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