European carmaker Stellantis and Chinese battery maker CATL announced Tuesday they will build a 50-gigawatt-hour lithium iron phosphate (LFP) battery factory in Spain, Kallanish learns. 

The gigafactory will be established at Stellantis’ manufacturing base in Zaragoza, with a planned investment of €4.1 billion ($4.3 billion). The project will be developed under a 50-50 joint venture, with first production planned by end of 2026.

According to a joint statement, the factory will be designed to be completely carbon neutral. The partners intend to implement the investment gradually, increasing capacity in line with European demand. They also note the need for support from the Spanish government and the European Union.

Stellantis sees this collaboration as an opportunity for it to provide better, more durable and more affordable electric sedans, crossovers and sports utility vehicles in the mid-range B and C segments. 

At the same time, Stellantis is also developing ternary lithium battery technology and products, under its “dual-chemistry approach.” The carmaker aims to become net zero in 2038. 

The transaction is expected to be completed in 2025 and is subject to customary conditions. It comes as CATL, the world’s largest battery manufacturer, continues to expand its localisation efforts in the EU. The company already has a cell plant in Germany and is building one in Hungary.

The agreement also follows the resignation of Stellantis’ ceo Carlos Tavares and the indication that CATL is not ready to invest in financially-troubled Northvolt.