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Key Takeaways From Volkswagen's (VWAGY) Power Day Event

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Volkswagen AG (VWAGY - Free Report) recently outlined its next-generation battery and charging strategy up to 2030 in its first Power Day presentation, a virtual seminar, held on Mar 15. The German auto giant unveiled a game plan to drive down the complexity and cost of producing batteries for electric vehicles (EV) in an effort to accelerate the transition from gasoline-powered cars to carbon-neutral transportation solutions.

Amid the heightening climate change concerns, investors are intrigued by automakers that provide green transportation solutions. Automakers like Tesla (TSLA - Free Report) , General Motors (GM - Free Report) and Ford (F - Free Report) are leaving no stone unturned to step up their EV game. Thus, amid the intensified competition in the EV space, the goal of the Power Day presentation was to shine a spotlight on Volkswagen’s long-term strategy, which is aimed at making its electric cars attractive and viable for as many people as possible.

Highlights of the Power Day

Volkswagen — which currently carries a Zacks Rank #3 (Hold) — made big announcements during the Power Day event, somewhat parallel to Tesla’s recent Battery Day event. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Per Volkswagen, it will reduce the costs of producing its batteries by up to 50%, build multiple battery factories around the world, expand its network of charging stations, and eventually transition to solid-state technology that would reduce costs and boost efficiency. The ultimate goal is to make electric cars with longer ranges and quicker charging times — the two of the biggest hurdles to mass EV adoption.

Unified Battery Cells

Starting 2023, Volkswagen plans to roll out a new unified prismatic cell design of its batteries that will be installed across the automaker’s brands. Aside from the planned in-house production of battery, massive cost benefits are expected from the new unified battery cells. The goal is to have this unified cell design steering up to 80% of the automaker’s electric vehicles by 2030. This, in turn, will help the company to bring down the cost of battery production below $100 per kilowatt hour, making EVs affordable and the dominant technology in the auto sector.

Gigafactories in Europe

Volkswagen plans to accelerate the development of production capacities in Europe in order to meet the surging demand for battery cells. The automaker plans to have six battery cell production plants operating in Europe by 2030, which it will build alone or with partners. The new factories are expected to have a production capacity of 240 gigawatt-hours per year following completion. The first two plants will be in Salzgitter, Germany (coming online in 2023), and Skelleftea, Sweden (from 2025).  Both plants will have a production capacity of up to 40 gigawatt-hours per year.

Charging Network Expansion

Volkswagen intends to have 18,000 public fast-charging points in operation in Europe by 2025, marking a five-fold increase compared to the current state of EV charging and is equivalent to about one third of the total demand predicted in the continent for 2025.

The company plans to achieve this through a series of strategic partnerships. In fact, the company announced partnerships with oil giant BP and top European utilities Enel and Iberdrola in the same event.

With BP, Volkswagen wants to establish about 8,000 fast-charging points throughout Europe, with majority of the stations located in Germany and the U.K. The fast-chargers with a charging capacity of 150 kW will be installed at a total of 4,000 BP and ARAL fuel stations.

In partnership with Iberdrola, Volkswagen will cover main traffic routes across Spain. In Italy, Volkswagen will collaborate with Enel to establish fast-charging stations along major highways and in urban areas. The automaker plans to outlay about €400 million in its European EV charging network by 2025.

The company is also expanding the public fast-charging network in the United States and China. The automaker plans to have 17,000 public fast-charging stations in China by 2025 and around 3,500 stations in North America by the end of 2021.

Value Chain Integration

Volkswagen’s new technology blueprint will also focus on integrating along the value chain all the way through to industrial recycling. Moreover, the company aims for a capex ratio of around 6% by 2025 and an annual clean net cash flow of more than 10 billion euros in its core automotive business.

Bidirectional charging

Beginning in 2022, Volkswagen models built on its MEB architecture will support bidirectional (two-way) charging — the ability to store green electricity from the solar energy system in the vehicle, which can be fed back into the home network if required. This will enable customers to be more independent of the public power grid, and will also save money and reduce carbon emissions.

While the Power Day event highlighted the company’s ambitious EV plans, it also made clear that the company will leave no stone unturned in becoming the undisputed leader in the EV landscape. However, it remains to be seen how the company fares in this race to improve battery technology while competing with auto biggies like Tesla.

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