VW’s China subsidiary has signed a Memorandum of Understanding (MoU) with CATL, the world’s largest battery manufacturer, to establish a strategic partnership. This comes as the group’s profit in the region is under pressure from both falling ICE and EV sales, the latter of which fell by 2% in 2024 compared to 2023.

What areas does the MoU cover?

Under a strategic partnership mentioned in the MoU the group will jointly develop new battery products aiming to improve the cost competitiveness of vehicles. The pair also plan to research areas such as battery recycling, battery swapping and vehicle to grid charging solutions among other things.

How much have CATL and VW worked together before?

According to Rho Motion’s EV and battery database, in 2024, CATL supplied batteries were in 24% of VW’s EVs sold, this included 100% of its Chinese EV sales for which CATL has been the main supplier since 2022. While the majority of CATL batteries in VW cars were deployed in China, in 2024 4% of VW’s sales in Europe contained CATL batteries.

An expansion of VW’s in China, for China strategy

Previously, the Chinese automotive market was a strong source of revenue for legacy OEMs such as VW, who were able to sell ICE vehicles to mass market. However, as electrification has taken hold rapidly in China, VW and other similar players have lost market share. These players have aimed to replace falling ICE sales with EV sales but have struggled in a competitive Chinese EV market. In April 2024, CEO Volkswagen Group, Oliver Blume, laid out the group’s “in China, for China” strategy, in which aims to increase its Chinese sales.

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How does this announcement fall into context of VW financials?

Blume in 2024 states “One in three of VW’s vehicles sold is purchased in China” underpinning the importance of China in VW’s overall strategy. While China’s EV sales have grown year on year, 40% in 2024, VW has found itself struggling with its EV sales shrinking 2%. This is reflected in its profit margins.


In the first three quarters of 2024, VW’s net profit margin fell to 3.4% down from 5.0% in the same period in the previous year. To some extent this has been driven by falling ICE vehicle sales in China, from 2023 to 2024 VW’s ICE vehicle sales fell over 10% in the country. However, falling profit margins have also been driven by the need to increase funding into R&D as it looks to improve its EV offering, making it more competitive in the market. A partnership with CATL may prove vital in coming years to ensure VW’s long-term competitiveness in the EV market.

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