Sports car manufacturer Porsche is exploring the potential acquisition of the large-format lithium-ion electric battery business from struggling German manufacturer Varta, whose share price soared on Friday following this announcement.
Liberating Investment
The two companies have entered into a non-binding letter of intent, expected to lead to the separation of the subsidiary into an independent entity, allowing Porsche to acquire a “majority stake” in V4Drive, Varta announced Thursday evening.
The value of the proposed transaction has not been disclosed. Varta, known to the public for its consumer batteries but also manufacturing batteries for cars and renewable energy storage systems, saw its share price jump nearly 20% on the Frankfurt Stock Exchange on Friday.
Financial Relief for Varta
For the heavily indebted and restructuring company, Porsche’s investment would have a “liberating” financial effect, according to analyst Jürgen Molnar of Robomarket. Varta’s share, currently trading at just over 10 euros, was worth almost 200 in early 2021.
For Porsche, a sporty subsidiary of Volkswagen undergoing electrification, this investment could help reduce its dependence on Asian battery suppliers, such as China’s CATL.
Porsche’s Battery Development Efforts
Porsche embarked on a project to develop its own batteries in 2021 through its subsidiary Cellforce, which is expected to mass-produce high-performance batteries in 2024.
However, the location for the factory, originally planned for Baden-Württemberg (Southwest), has not yet been decided.
Potential US Production
A possible location in the United States, motivated by American subsidies under the Inflation Reduction Act (IRA), has been mentioned in the German press.
Another option would be battery sourcing from Volkswagen Group’s PowerCo subsidiary, with production expected to start in 2025. “No decision has been made yet,” a Porsche spokesperson told AFP on Friday.
Chinese Competition and Electrification Goals
Like other manufacturers, Porsche faces the threat of Chinese brands that are ahead in the electric vehicle market.
In 2023, the brand sold only about 40,629 units of the Taycan, its sole fully electric model on the market, representing 12.7% of its total sales. This is still far from its goal of having more than 80% of its deliveries be fully electric models by 2030.