Volkswagen partners with CATL to improve EV battery tech

Volkswagen hasn't been faring well in the world's largest car market, but a new partnership could be the key to turning it all around.

Mar 10, 2025 - 01:24

Volkswagen partners with CATL to improve EV battery tech

2024 was not a good year for Volkswagen by any metric, largely due to falling sales in China. Electric vehicles have taken the Chinese market by storm, and domestic automakers saw sales rise at the expense of foreign legacy automakers. In an effort to bounce back, Volkswagen recently announced a strategic cooperation with Chinese battery giant CATL.

VW and CATL will focus on cost-effective battery development

Volkswagen China announced their strategic partnership on Chinese social media platform Weibo. The cooperation agreement is an important milestone in Volkswagen Group’s electrification strategy.

The agreement was signed by CATL, Volkswagen Group China, and several of Volkswagen’s Chinese joint ventures, including FAW-VW and SAIC-VW. In addition to battery technology, the companies agreed to work together in raw material supply transparency and vehicle-to-grid technology.

“By deepening cooperation with CATL, we will create high-performance, cost-effective battery solutions. Our core task is building a strong local supply system. This is also a crucial part of the Group’s In China, For China strategy”, said Alfonso Sancha, Executive Vice President of Volkswagen Group China.

Volkswagen’s struggles have continued into 2025

Volkswagen’s struggles over the past year have been well documented. The German automaker made it through 2024, but not without nearly closing several production facilities in its home country. VW Group as a whole sold 2.9 million vehicles in China in 2024, down 10% from the previous year.

Despite selling nearly three million vehicles last year, the German automaker could face an even worse 2025 in China, the world’s biggest car market. Even so, Volkswagen has made it clear that its commitment to China is unwavering.

Last spring, Volkswagen announced a 2.5 billion Euro investment in the Chinese market and purchased a $700 million stake in Xpeng, an EV startup based in China. VW plans to launch two new all-electric cars based on Xpeng’s platform.

VW Group also launched an all-new brand dubbed Audi, not to be confused with the German automaker bearing the four-ring logo. VW’s Audi brand will produce China-exclusive EVs based on SAIC’s IM platform.

SAIC-Volkswagen’s ID. series saw more than 130,000 vehicles sold in 2024, up more than 23% year-over-year. The ID. series currently includes the ID.3, ID.4 X, and ID.6 X, the latter of which is exclusive to China.

Volkswagen planned to launch the ID.7 S but scrapped those plans following disappointing sales from its FAW-VW joint venture, which sold just nine examples of the ID.7 Vizzion in January 2025. That’s down from 2,269 units in January 2024, which translates to a 99.6% drop year-over-year.

CATL holds nearly half of China’s battery market share

China is a hotbed for some of the world’s largest battery manufacturers, and CATL leads the pack by a significant margin. As of February 2025, CATL holds a 45.5% market share, with BYD coming in second place with a 24.9% market share.

Volkswagen and CATL’s strategic cooperation will focus on developing cost-efficient batteries, as well as battery swapping and refining battery recycling processes. CATL’s automotive customers span both foreign and domestic manufacturers, with some of the largest names on the list including Tesla, BMW, Mercedes-Benz, and Geely.

Final thoughts

Volkswagen had a rough year in 2024, but it looks like the German automaker is pulling out all the stops to stem the bleeding. While VW has several other active joint ventures with Chinese automakers, their strategic cooperation with CATL is arguably the biggest step forward in becoming a hardcore player in the competitive EV segment. Whether all those investments and partnerships will be enough to overcome China’s domestic automakers is up in the air.

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