BERLIN, July 11 (Reuters) - Volkswagen will

massively ramp up production of solid-state batteries developed

with U.S. startup QuantumScape ( QS ), both companies said on

Thursday, as the German carmaker aims to bring the technology

into more vehicles.

Under an agreement announced on Thursday, Volkswagen's

battery unit PowerCo will receive the licence to mass-produce

battery cells based on QuantumScape ( QS ) technology, pending

technological progress and certain royalty payments, they said.

The deal replaces an earlier joint venture between the two

companies, Volkswagen said. Volkswagen owns 17% in QuantumScape ( QS ),

according to its annual report, a stake that is currently worth

$459 million.

Under the agreement, Volkswagen's battery unit PowerCo can

manufacture up to 40 gigawatt-hours (GWh) per year using the

QuantumScape ( QS ) technology, with an option to expand to 80 GWh,

which is enough to equip approximately 1 million vehicles

annually, they said.

Solid-state batteries can hold more energy than current

liquid electrolyte batteries. Automakers and analysts expect

them to speed transition to EVs by addressing their often

limited range, which remains a major consumer concern.

"QuantumScape's ( QS ) technology is poised to enter a pivotal

stage where PowerCo's specialized expertise, resources and

global factories can help facilitate the transition to

industrial-scale production," said PowerCo CEO Frank Blome.

The companies will target a product that will be scaled-up

for integration into a Volkswagen Group vehicle series.

The agreement supersedes a joint venture between the two

companies to co-manufacture batteries that was founded in 2018.