Volvo Cars, Northvolt Pick Gothenburg for New Battery Plant

(Bloomberg) --

Volvo Car Group and Northvolt AB selected the Swedish city of Gothenburg for their planned electric-car battery plant, a boon to European efforts to localize cell production in the region.

Construction of the site will start next year, with production of cells for Volvo and Polestar models to begin in 2025, the companies said Friday. The factory and a nearby research facility will require an investment of around 30 billion kronor ($3.3 billion).

“Our battery cell partnership with Northvolt is key to our strategic ambitions in electrification,” Volvo Cars Chief Executive Officer Hakan Samuelsson said in a statement. The companies selected former Tesla Inc. executive Adrian Clarke to lead their joint production company.

MORE: French EV Battery Startup Picks Dunkirk Port for First Plant

Volvo, controlled by China's Zhejiang Geely Holding Group Co., has an ambitious plan to sell only fully electric cars by the end of this decade. The new factory is to employ as many as 3,000 people and produce up to 50 gigawatt-hours of cells a year -- enough to supply around half a million cars.

Energy Supply

The plant will be powered entirely with non-fossil energy sources, Volvo Cars' engineering head Javier Varela said in an interview. The target is to ramp up the site's production capacity to 30 gigawatt-hours by the end of 2025, he said.

The companies' plan bolsters efforts to expand Europe's battery-making industry, a sector that's currently dominated by Asian players including Panasonic Corp. and China's Contemporary Amperex Technology Co. Last year, Mercedes-Benz joined Stellantis NV and TotalEnergies SE to boost the scale of their battery venture to more than 7 billion euros ($8 billion).

Northvolt said in December it had secured more than $30 billion worth of contracts from electric-car manufacturers including BMW AG and Volkswagen AG.