MADRID (Reuters) -Stellantis and Chinese battery maker CATL will invest 4.1 billion euros ($4.33 billion) in a factory making electric vehicle batteries in Zaragoza in northern Spain, they said on Tuesday.
The 50-50 joint venture is expected to start production by the end of 2026 and could reach a capacity of 50 gigawatt hours, depending on the evolution of the EV market in the region and on support from authorities, the two companies said in a statement.
Europe has been seeking to attract EV battery makers to build factories in the region – home to car makers such as Volkswagen (ETR:) and Stellantis (NYSE:) – as it tries to cut a reliance on Asia and win a green subsidies race with the United States.
The decision to award the factory to Spain comes after it abstained on imposing additional tariffs on Chinese EV imports to the European Union, and after Prime Minister Pedro Sanchez urged the EU to reconsider penalising Chinese-made EVs to avoid a trade war.
Chinese companies have to seek approval from Beijing for direct investments overseas, and China has privately told automakers to halt big investments in European countries that support imposing extra tariffs, Reuters reported in October.
Spain, Europe’s second-largest car producer, in 2020 announced a 5-billion-euro plan to attract EV and battery production using EU pandemic relief funds.
Stellantis has received around 300 million euros from that plan as part of Spain’s efforts to consolidate its car production sector, according to the government.
RENEWABLE POWER
Spain is an attractive location for battery plants because of its abundance of wind and solar power.
Indeed, solar energy is 20-25% cheaper than in central Europe and wind power resources in the Iberian peninsula exceed the EU average by 5-10%, a McKinsey study showed in July.
Renewable energies represent 77% of total installed power capacity in the Aragon region, a reason cited by companies such as Microsoft (NASDAQ:) and Amazon (NASDAQ:) for building multi-billion-euro data centres there.
Plans elsewhere in the EU have faced bureaucratic hurdles, production problems and slower EV demand than expected.
Last month, Sweden’s Northvolt filed for Chapter 11 bankruptcy protection in the U.S. after the loss of a major customer and lack of funding.
The CATL-Stellantis venture would bring “innovative battery production to a manufacturing site that is already a leader in clean and renewable energy,” Stellantis’ Chairman John Elkann said.
Robin Zeng, CATL’s chairman and CEO, visited Madrid on Monday, where he met with Prime Minister Pedro Sanchez.
BOOSTING EV OUTPUT IN SPAIN
The project is a key part of Stellantis’ objective to boost EV production at its plants in the Aragon and Galicia regions.
The Zaragoza plant would be CATL’s third factory in Europe; the other two are wholly owned by the battery maker.
CATL operates a six-year-old factory in Germany, its first in Europe, with a total investment of 1.8 billion euro to achieve an ultimate production capacity of 14 gigawatt hours.
It is building a new plant in Hungary with an investment of 7.3 billion euros and planned capacity of 100 GWh.
Stellantis is also the largest investor in the ACC (NS:) battery-making joint venture, together with Mercedes and French oil company TotalEnergies (EPA:).
ACC has started production at a gigafactory in France, while the development of two other gigafactories, in Italy and Germany, has stalled due to low demand for electric vehicles.
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