London — VW has started production of lithium-ion battery systems at a factory in Braunschweig, Germany, set to produce 500,000 units per year, the automaker said Friday.

VW started the production of its first electric-only model ID.3 on Monday, targeting 100,000 units in 2020, and rising to 330,000 by 2022.

"The Volkswagen Group plans to sell some 22 million EVs worldwide by 2028, thus helping EVs make the breakthrough," it said.

The Braunschweig battery factory will assemble systems using cells supplied by Asian manufacturers, already contracted to supply $40 billion-worth of batteries to help meet VW demand of 150 GWh/year by 2025.

VW also plans to produce its own li-ion battery cells in a joint venture with Northvolt with production at a factory in Salzgitter set to start in 2023 with an initial annual output of 16 GWh, it said in September.

Overall, VW plans to invest Eur34 billion by 2022 into electro-mobility and a further Eur15 billion through its Chinese JV.

Research into power demand of EVs varies depending on usage and battery size, but averages around 2.5 TWh/year from 1 million EVs in the German context.

One million EVs could also reduce oil demand by 12,000 b/d, research by ExxonMobil shows.

Based on those assumptions, VW's 2028 global sales target of 22 million EVs could boost power demand by 55 TWh/year and reduce oil demand by 264,000 b/d, S&P Global Platts calculations show.

-- Andreas Franke, andreas.franke@spglobal.com

-- Edited by James Burgess, james.burgess@spglobal.com