Volkswagen hits the breaks on battery unit IPO

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Volkswagen hits the breaks on battery unit IPO

Bloomberg reports Tuesday that Volkswagen (ETR: VOWG_p ) AG (VW) is postponing its plans to draw external investors for its battery unit, citing sluggish demand for electric vehicles and a challenging landscape in the industry's shift toward electric mobility.

According to sources familiar with the matter who requested anonymity, the company has also delayed discussions with potential investors due to concerns about its ability to produce batteries at a large scale.

The company is no longer prioritizing stake sales or the potential listing of its PowerCo business in the current or upcoming year. Consequently, VW's preference shares experienced a negative turn, dropping by as much as 1%. The stock has declined by 1.9% over the past year, resulting in a valuation of €64 billion ($69.3 billion) for the automaker.

According to insiders, the situation remains fluid, and VW might reconsider its plans if market conditions improve. 2023 witnessed the worst performance for initial public offerings in over a decade, as highlighted by Bloomberg data, primarily attributed to the rise in interest rates.

Further underscoring challenges in the electric vehicle sector, Renault SA has also decided to halt efforts to list Ampere EV as well as the company’s software arm, citing a lack of interest in listings and a slower adoption of EVs.

Despite previous statements from VW's CEO, Oliver Blume, during the company's capital markets day in June, suggesting that an initial public offering was a feasible option at the appropriate time, VW is now emphasizing its commitment to preparing for "investor readiness from 2024 onwards,"

Across the industry, automakers such as VW, General Motors (NYSE: GM ), and Ford (NYSE: F ) are all scaling back their EV ambitions following a period of rapid growth, with slowing orders attributed to vanishing subsidies, insufficient charging infrastructure, and elevated EV prices.

Concerning PowerCo, VW said that the company is willing to “open the capital structure and continue to evaluate our options against the backdrop of the market environment.” The ramp-up of EVs is not as steep as expected, but investor interest in PowerCo “remains high,” VW said.

PowerCo began construction on two facilities in Europe, despite the challenges posed by elevated energy prices affecting investment decisions across various industrial sectors in the region. Production is scheduled to begin in Germany next year and in Spain in 2026, with preliminary activities underway for a third site in Canada.

PowerCo's focus is on developing standardized cells that can be incorporated into most of the group's electric vehicle (EV) platforms. This strategic approach could offer significant advantages if successfully executed but also entails inherent risks.

Additionally, through its U.S. partner, QuantumScape Corp., Volkswagen is exploring solid-state batteries, a technology with the potential to enhance the efficiency and cost-effectiveness of EVs.

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