Swedish carmaker Volvo said on Wednesday it had signed long-term battery supply deals with Asian firms LG Chem and Contemporary Amperex Technology Co Ltd (CATL), as it pushes its EV target of 50 percent of sales by 2025.
The agreements follow a series of pacts between Asia-based battery companies and global carmakers, who are planning a $300 billion (232 billion pounds) surge in spending on electric vehicle (EV) technology over the decade.
Long-term battery supply arrangements are much-valued by carmakers and investors, as they help to clear supply bottlenecks at a time of soaring demand and hold out the promise of cheaper batteries over time.
Volvo Cars is investing about 5% of its annual revenue – a little more than $1 billion a year – on electric and driverless cars.
The company, owned by China’s Geely, is launching EV models under the Volvo marque and luxury performance sub-brand Polestar as it takes on global peers including Volkswagen, Tesla and General Motors.
Volvo has said it plans to get half its sales from fully electric cars by 2025 and expects its margins on electric cars to match those of vehicles with combustion engines by that time.
“The future of Volvo Cars is electric and we are firmly committed to moving beyond the internal combustion engine,” Volvo Cars President and CEO Hakan Samuelsson said in a statement on Wednesday.
European auto makers typically source batteries from companies in China, South Korea and Japan, which dominate the supply chain for EV batteries.
The United States has recently sought to limit China’s EV supply chain dominance, Reuters reported.
The Volvo deal sent shares in LG Chem and CATL up more than 3% on Wednesday.
The companies said the battery deals were valued at several billion dollars but did not disclose detailed financial terms.
Volvo said its first battery assembly line was under construction at its manufacturing plant in Ghent, Belgium, and would be finalised by the end of this year.
It was building plug-in hybrid variants of the XC40 in Ghent and planned to make fully electric XC40s there, it added.