German automaker Volkswagen plans to invest in mines to reduce battery costs, meet half of its own demand and sell to third-party customers, through its battery unit PowerCo. The carmaker also wants PowerCo to become a global battery supplier, not just produce for Volkswagen’s needs. As a start of this goal, PowerCo will deliver battery cells to Ford for the 1.2 million vehicles the U.S. carmaker is building in Europe on Volkswagen’s electric MEB platform. In the longer term, the company also plans to build enough cells to meet half of its global battery needs, with most production capacity located in Europe and North America.

“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” Volkswagen’s board member in charge of technology Schmall said.

The German automotive major has started partnering on supply deals with mines in Canada, where it will build its first North American battery plant.

“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” Schmall said.

Automakers including Tesla and Stellantis, as well as Volkswagen, have been scrambling to lower battery costs in order to make electric vehicles (EVs) more affordable.

Only Tesla has pledged more investment into battery production than Volkswagen, but ramping up production is a challenge for the EV maker as well, and it still works with Asian suppliers.

Many automakers have signed agreements with producers to supply battery materials like lithium, nickel and cobalt but few have so far made direct investments in mines.

Volkswagen’s PowerCo, set up last year, is targeting €20 billion in annual sales by 2030. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain and 2027 in Ontario, Canada.

Still, Schmall is confident the carmaker can expand quickly – and must do so if it wants to build an affordable EV, in which 40% of the costs come from the battery.

Volkswagen unveiled details of a €25,000 EV it aims to sell in Europe from 2025.

In Volkswagen’s €180 billion five year spending plan, up to €15 billion is earmarked for its three announced battery plants and some raw material sourcing.

The carmaker has so far nailed down raw material supply until 2026, by which time the German and Spanish plants will be in operation, and will decide in the next few months how to meet its demand from then on.

It has also ordered some $14 billion in batteries from Swedish startup Northvolt.

Currently Asian producers such as China’s CATL and South Korean battery makers LG Chem and Samsung SDI are dominating global cell production. Asian firms make up almost half of planned battery cell capacity in Europe.