Volkswagen China says will form ventures with Huayou Cobalt, Tsingshan Group

© Reuters. FILE PHOTO: The charging plug of an electric Volkswagen Passat car is pictured at charging station at a VW dealer in Berlin, Germany, February 2, 2016. REUTERS/Fabrizio Bensch

SHANGHAI (Reuters) – Volkswagen (DE:VOWG_p) Group China said on Monday it will form joint ventures with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies, in a bid to control battery costs at a time of surging raw material prices.

The three companies have signed memorandum of understandings for two joint ventures, the first between the three firms in Indonesia, where they will jointly invest their respective advantages and resources for battery raw materials production, Volkswagen said in a statement.

More than 10% of the world’s laterite nickel ore reserves are located in Indonesia, the German carmaker added.

Volkswagen’s second joint venture will be formed with Huayou for the refining of nickel and cobalt sulfates, precursor and cathode material production, it said.

“The cooperation aims to achieve significant cost advantages, secure the raw material supply and achieve a transparent and sustainable supply chain,” it said.

“The two partnerships target to contribute to the Group’s long term target of a 30-50% cost reduction on each battery.”