Automotive giant Volkswagen has closed a deal to source CO2-free lithium produced by the Vulcan Group in Germany’s Upper Rhine Valley to supply its European battery cell factories, in an effort to reach climate neutrality and lessen its dependence on overseas suppliers such as Australia or Chile.

Vulcan will filter out the sought-after lithium in a process linked to deep geothermal power generation, which the company claims renders the production CO2-free, a balance that is improved through short supply chains.

"Volkswagen is implementing its battery strategy very consistently and at high speed,” said Thomas Schmall, chief executive at Volkswagen Group Components.

“The Volkswagen standard cell must be at the forefront in terms of performance, costs and sustainability right from the start.”

Vulcan will start supplying Volkswagen with a total of 34,000 to 42,000 tonnes of lithium from 2026 on, over the course of an initial five-year contract. The supply volume could be increased if investments are stepped up.

The carmaker is currently building up six lithium-ion 'gigafactories' across Europe that will have a combined production capacity of 240GWh.

The Vulcan communications team told Recharge that 40,000 tonnes of lithium are sufficient for the production of about one million electric vehicles.

The company couldn’t immediately tell how much electricity will be generated as a by-product of the lithium extraction, but said the power generation allows for cost savings that will render zero-carbon lithium made in Germany cheaper than current market prices.

“With this agreement, our Zero Carbon Lithium project will become an important factor in Volkswagen's leading global goal of producing carbon-free electric vehicles, including all raw materials in the battery supply chain,” Vulcan CEO Francis Wedin said.

“We look forward to working closely with the Volkswagen Group, the largest car manufacturer in the world, in order to establish a sustainable, local lithium supply for the German and European market.”

Vulcan has already signed preliminary lithium supply deals with carmakers Stellantis and Renault.

Germany’s Upper Rhine Valley stretches across the southern states of Baden-Württemberg, Hesse and Rhineland-Palatinate, which with its adjacent extinct volcanoes according to the German geothermal federation has ideal conditions for geothermal energy production.

Its thermal waters contain lithium-carbonate.

Baden-Württemberg-based utility EnBW has also started to investigate the production of lithium linked to geothermal energy production. The company said water from a geothermal plant in Bruchsal contains 150 milligrams of lithium per litre.

The geothermal plant that only has a capacity of 0.5MW thus could produce enough lithium for 20,000 electric car batteries per year, EnBW said.