FRANKFURT -- Opel and French battery manufacturer Saft can move forward with a plan to build electric vehicle battery cells in Germany after the European Union approved the use of state aid for the project.
The companies plan to produce battery cells at Opel's components plant in Kaiserslautern in western Germany near the French border.
The European Commission said on Monday that state aid could be given for the project. It said battery production in Europe is of strategic interest.
Opel said the decision will allow the PSA/Opel/Saft joint venture, which is called Automotive Cell Company (ACC), to finish drafting a business plan for the project, but declined to provide further details.
"The project partners will now prepare to complete an examination of the project before a final decision is taken," Opel said in a statement.
A positive assessment could be made in weeks and a decision could potentially even be taken before the end of the year, a source familiar with the matter said. Production could start in in the middle of the next decade.
Carlos Tavares, CEO of Opel parent PSA Group, had said in September that the project was dependent on receiving support from France and Germany, because otherwise its would be deeply loss-making.
European automakers are investing heavily in electric cars to meet the EU's tougher CO2 reduction goals. Tavares said the bloc needs its own battery suppliers for these vehicles. "If you set a very demanding [CO2 reduction] objective for 2030 and at the same time you don’t have the batteries, we are all going to run to the Chinese suppliers and they will set the price," he said.
Tavares declined to provide details of the Kaiserslautern plan, but said it was a significant investment "in the several hundreds of millions of euros."
In total, the European Commission gave the go ahead for governments in seven countries to grant 3.2 billion euros ($3.53 billion) to support projects for research and innovation in battery technology. The countries are Germany, France, Italy, Belgium, Finland, Poland and Sweden.
The public funding is expected to unlock an additional 5 billion euros in private investments, the Commission said in a news release on Monday.
The state-aided projects will involve 17 direct participants, the release said.