Volkswagen Reportedly in Talks with Chinese Firm Gotion to Invest in Spanish Battery Plant

German automotive giant Volkswagen is reportedly holding in-depth talks with its Chinese partner Gotion (002074-CN), potentially allowing Gotion to take a stake in Volkswagen's battery plant in Valencia, Spain. This highlights Volkswagen's attempt to reduce dependence on Asian battery suppliers while simultaneously seeking external cooperation amid cost pressures.

On Monday (27th), Spanish automotive publication La Tribuna de Automocion, citing industry sources, reported that negotiations between the two parties have entered an advanced stage. Gotion's CEO Li Zhen recently led a delegation of senior executives on a site visit to assess investment and collaboration options.

The Valencia battery plant, operated by Volkswagen's battery subsidiary PowerCo, is scheduled to begin production by the end of this year, with capacity gradually expanding thereafter. Reports suggest the two parties may establish a joint venture for the plant, with Gotion potentially holding a majority stake in the JV.

However, a PowerCo spokesperson emphasized that the company has no plans to relinquish control of the Valencia plant. In an email to Reuters, PowerCo stated it regularly evaluates various strategic opportunities, including potential partnerships, but declined to comment on the report details. Gotion has not yet responded to requests for comment.

Volkswagen established PowerCo to build its own battery business in Europe, reduce reliance on Asian manufacturers, and catch up with competitors like BYD (01211-HK) and Tesla (TSLA-US) in the electric vehicle market. However, Volkswagen has recently faced challenges including weak EV demand, rising production costs, and intensified competition in the Chinese market, prompting large-scale cost-cutting measures.

Volkswagen has also committed to streamlining its extensive investment portfolio and reducing automobile production in Europe. In this context, attracting Gotion's investment into the Valencia battery plant could help share construction and operational costs, but how PowerCo maintains control over the plant and its technology will be a key point in negotiations.