German automotive major Volkswagen Group (VW) has confirmed that it is preparing to build a wholly owned battery system plant in the Anhui province of China, called VW Anhui Components Company. The planned new production facility will have an annual capacity of more than 150,000 battery systems, and it will support Volkswagen Anhui -- the German automobile manufacturer’s first majority-owned joint venture (JV) for all-electric vehicles that was formerly called JAC Volkswagen.

The new battery plant will occupy more than 45,000 square meters close to the aforementioned Volkswagen Anhui. The German automobile giant said that placing the new plant next to Volkswagen Anhui will bring logistical as well as cost efficiencies. In addition, it will ensure a faster delivery time to market.

Production at the VW Anhui Components Co., which will initially employ 200 people, is expected to start sometime in or around the second half of 2023. Initially, it will work with a capacity to produce 150,000 high-voltage battery systems but the capacity will gradually increase to 180,000. The battery systems produced by the plant will be for Volkswagen Anhui’s next-generation all-electric vehicles that will be based on the group’s Modular Electric Drive Toolkit (MEB platform). The first fully-electric vehicle is expected to roll off the JV’s production line in 2023.

To construct the wholly-owned VW Anhui Components Co. in China, the German manufacturer has set aside more than €140 million (roughly $164 million). The amount will be spent by 2025.

Dr. Stephan Wöllenstein, Chief Executive Officer (CEO) of Volkswagen Group China, said in a statement that keeping key components like battery systems in the group’s own value chain would allow it to leverage Group-wide synergies and innovations.

Announcing the new facility, Wöllenstein added, “Volkswagen Anhui and VW Anhui Components Company, alongside our two strong Joint Ventures, are crucial to our electrification strategy and to achieving our goal of the Volkswagen Group China fleet reaching over 40% NEVs by 2030.”

The battery system for the group’s MEB platform-based vehicles will consist of numerous cell modules, a cell management controller and battery management system with a connector strip.

Amid growing demand for battery-powered vehicles, VW Group is currently building three MEB battery manufacturing facilities, one in Asia, Europe and North America each. While its Asian battery system plant is going to be constructed in Anhui, China; Mlada Boleslav in Czech Republic and Chattanooga, Tennessee will house its European and American battery system plants, respectively.