Chinese power battery maker Gotion High-tech (002074.SZ) and PowerCo, the battery platform under Volkswagen, have finalized a European joint venture plan with a total investment of €3.222 billion (approximately $3.7 billion). According to an announcement released on September 28, the two parties will establish joint ventures in Valencia, Spain; Surany, Slovakia; and Kenitra, Morocco, to build cell manufacturing and LFP cathode material production capacity. The day after the announcement, Gotion High-tech’s shares hit the daily limit-up just eight minutes after market open, with more than 890,000 lots locked in buy orders.
This represents a structural upgrade in how Chinese battery companies expand overseas. Gotion High-tech is no longer merely a cell supplier to Volkswagen, but is now co-owning European local production capacity with the world’s second-largest automaker at a nearly equal capital contribution ratio. Gotion’s total contribution is approximately €1.598 billion, while PowerCo’s is approximately €1.624 billion—nearly identical in scale.
The equity arrangements across the three joint ventures reveal a clear strategic division of labor. The Valencia project, the largest in investment scale, plans an annual capacity of 29.1 GWh of lithium batteries with a total investment of approximately €2.262 billion, with PowerCo holding a 51% controlling stake and Gotion holding 49%. Gotion’s subsidiary has also secured a €1.094 billion engineering, procurement, and construction (EPC) contract for the project. The Surany, Slovakia project plans 8.4 GWh of cell capacity with a total investment of approximately €480 million, with Gotion holding a 51% controlling stake. The Kenitra, Morocco project plans an annual output of 100,000 tonnes of LFP cathode material, also with a total investment of approximately €480 million, with Gotion holding a 51% controlling stake. All three projects are expected to have construction periods of no more than five years.
The Compliance Logic Behind the Equity Structure
The arrangement of Volkswagen holding the controlling stake in the Spanish plant is no accident. In May 2025, the European Commission issued a legislative proposal for the Industrial Accelerator Act, which imposes restrictive foreign investment clauses on four major industries including batteries and electric vehicles, with conditions such as foreign ownership not exceeding 49%, mandatory technology transfer, and a local employee ratio of no less than 50%. PowerCo’s 51% stake in the Valencia plant neatly sidesteps the foreign ownership cap.
The deeper compliance pressure comes from the EU Battery Regulation. Carbon footprint declarations for energy storage batteries became mandatory on February 18, 2026, and the digital battery passport will take effect on February 18, 2027. The accounting rules only recognize two models—”national average electricity consumption mix” and “directly connected electricity”—while the green certificates commonly purchased by Chinese companies are not accepted. Since August this year, EU customs has shifted from a “declare-and-pass” approach to mandatory random inspections of carbon footprint declarations for imported batteries, and several batches of Chinese battery products exported to the Port of Rotterdam have already been detained for non-compliant green power certificates.
Against this backdrop, moving production lines to the Atlantic side—manufacturing directly in Europe or in countries with trade facilitation arrangements with the EU—has become the most direct path to reducing compliance costs. Morocco has existing trade arrangements with the EU and signed a Belt and Road cooperation plan with China in 2023, while its labor costs are significantly lower than Western Europe. Locating the cathode material base there effectively brings upstream costs into the European supply chain radius.
Volkswagen’s Predicament and Gotion’s Opportunity
Volkswagen is going through the pains of transformation. In 2025, group sales revenue was €321.91 billion, down 0.8%, but operating profit was only €8.87 billion—a 53% plunge and the worst result since 2016—with the operating margin falling from 5.9% to 2.8%. In March this year, Volkswagen signaled plans to cut approximately 50,000 jobs in Germany by 2030; on September 3, the supervisory board unanimously approved the 2030 future plan: cutting 100,000 jobs globally, about 15% of its 650,000-strong workforce, halving its vehicle lineup, and placing four German plants on the closure list.
PowerCo was originally meant to carry Volkswagen’s ambition for an entire battery supply chain, but after the European EV boom cooled, its expansion pace slowed steadily: the fourth plant site selection was shelved in November 2023, the introduction of external investors was postponed in 2024, and only one of two planned production lines in Salzgitter was ultimately built. The retreat of Europe’s battery industry extends beyond this. Northvolt, once seen as the hope of the entire continent, declared bankruptcy after burning through $15 billion in investment; ACC, the joint venture of Stellantis, Mercedes-Benz, and TotalEnergies, also pressed pause on two gigafactories.
European automakers have done the math: the comprehensive production cost of mass-produced power batteries is about 30% higher than in China, electricity prices are three to five times higher, and worker hourly wages are five times higher. Volkswagen’s choice has therefore become pragmatic—rather than continuing to pour money into projects that cannot get off the ground, it is better to hand the factory to someone who can make it work. The Valencia plant was previously led by PowerCo for years, and cell mass production never got off the ground, but it has already received more than €260 million in subsidies from the Spanish government’s PERTEVEC program, of which €152 million in cash subsidies has already been disbursed. Gotion is entering an existing base with a 49% stake that has already secured government subsidies and sits at the core of Spain’s automotive industry cluster—a deal where both parties get what they need.
Six Years of Cooperation: From Supplier to Joint Venture Partner
The binding relationship between Gotion and Volkswagen began in 2020. In May of that year, Volkswagen China subscribed to approximately 26% of Gotion High-tech’s equity for about €1.1 billion, becoming the largest shareholder, while voluntarily relinquishing some voting rights to ensure that Li Zhen and the original management team retained control of the listed company. In 2021, the two parties signed a strategic cooperation framework agreement, and Gotion officially became a designated developer of Volkswagen’s unified cell. In 2023, Gotion secured the designation for Volkswagen’s overseas LFP unified cell. At the end of 2025, the Hefei UC plant achieved mass production and delivery of Volkswagen’s unified cell, with order cycles covering 2026 to 2032.
The establishment of these three overseas joint ventures marks an upgrade from “selling products” to “co-building production capacity.” The Spanish plant is controlled by Volkswagen, preserving the European automaker’s dominance over core battery assets; the Slovakian cell plant and Moroccan cathode material base are controlled by Gotion, giving Gotion greater operational say in manufacturing processes and upstream materials. Gotion is not only contributing capital but also taking on EPC contracts, with its manufacturing expertise and production line construction experience flowing directly into European local bases.
Gotion High-tech reported revenue of CNY 27.776 billion (approximately $4.1 billion) in the first half of 2026, up 43.22% year-on-year, with net profit attributable to shareholders of CNY 1.386 billion (approximately $206.9 million), up 278.05%. Global power battery installations reached 28 GWh, with a market share of 4.6%, ranking fifth globally. Overseas revenue was CNY 9.476 billion (approximately $1.4 billion), accounting for 34.11% of total revenue, with a gross margin of 18.05%, significantly higher than the 14.34% of its domestic business.
But the other side of the coin is equally clear. There is a huge gap between non-GAAP net profit and net profit attributable to shareholders, with non-GAAP net profit in the first half expected to be only CNY 85 million to CNY 120 million, as non-recurring items such as fair value changes contributed significantly. Net cash flow from investing activities was -CNY 8.478 billion, and construction-in-progress continued to climb. The €1.598 billion capital contribution obligation, combined with prior investments in Vietnam, Slovakia, and elsewhere, puts the company at the peak of a high capital expenditure cycle. Overseas plants typically take two to three years from construction to full production, and depreciation and financing cost pressures will persist.
Hefei: The Other Half of the Bargaining Chip
Beyond the three joint venture contracts, Volkswagen’s chips in China are also placed on Hefei. Volkswagen Anhui is 75% owned by Volkswagen China and 25% by JAC Motors. In March 2024, the two parties increased capital by CNY 6.5 billion in proportion to their shareholdings, raising registered capital from CNY 7.356 billion to CNY 13.856 billion. On September 28, the ID.UNYX 09, developed on the MEB platform, rolled off the production line, with pre-sale prices ranging from CNY 199,900 to CNY 249,900 (approximately $30,000 to $37,000), and a hybrid direct-sales and franchise channel model. The CEO of Volkswagen Anhui revealed that the channel count must exceed 300 next year.
JAC Motors reported a net loss attributable to shareholders of CNY 749 million in the first half, with investment income from associates contributing approximately -CNY 130 million, mainly from Volkswagen Anhui. But JAC’s stock price hit its fourth consecutive daily limit-up intraday on September 28, as the market was clearly pricing in Volkswagen Anhui’s progress ahead of time.
On the same day, Gotion High-tech disclosed another announcement: Volkswagen China transferred 5.30% of Gotion High-tech’s equity for a total transaction price of CNY 2.317 billion. After the transfer, Volkswagen China’s stake dropped to 18.98%, still the largest shareholder, but without changing control—Li Zhen remains the actual controller.
Looking at Volkswagen Anhui together with the three joint ventures, Volkswagen’s direction is clear: vehicle manufacturing and R&D are anchored in Hefei, close to the Chinese supply chain; battery capacity is being established in Europe and North Africa through joint ventures. Vehicles stay close to the market; batteries stay close to the rules.
Key data for the three joint venture projects:
ProjectLocationCapacity PlanTotal InvestmentEquity StructureLithium battery plantValencia, Spain29.1 GWh€2.262 billionPowerCo 51%, Gotion 49%Lithium battery plantSurany, Slovakia8.4 GWh€480 millionGotion 51% controllingLFP cathode materialKenitra, Morocco100,000 tonnes/year€480 millionGotion 51% controlling
Note: Gotion’s total contribution is approximately €1.598 billion, and PowerCo’s total contribution is approximately €1.624 billion; all three projects are expected to have construction periods of no more than five years.
The projects remain at the agreement stage and still require approval from shareholders’ meetings as well as relevant regulatory authorities in the EU and North Africa. The challenges of localized operations in Europe should not be underestimated: production line yield ramp-up, union labor rules, energy costs, carbon tariffs, and changes in national industrial policies—each will affect the projects’ ultimate costs and returns.
For Gotion, the biggest variable lies in customer concentration. Volkswagen plans to continuously purchase Gotion’s unified cells from 2026 to 2032, and BOCOM International research predicts that Volkswagen could become Gotion’s most important incremental customer in 2026, with expected shipments exceeding 10 GWh. But “most important customer” does not mean “only customer.” The ultimate destination of the Valencia plant’s capacity and whether the Slovakian plant can secure orders from European automakers beyond Volkswagen are the key variables that will determine the long-term return on this investment.