Volkswagen Group will invest 2 billion euros ($2.3 billion) in a planned battery hub in Germany as part of a decision to create a dedicated company for the automaker's battery business.
The new unit will consolidate the processing of raw materials, battery development and managing its six future European cell factories, VW said in a statement on Monday.
VW will also work on designing new business models around reusing discarded car batteries and recycling.
"We want to offer our customers powerful, inexpensive and sustainable vehicle batteries, which means we need to be active at all stages of the battery value chain," VW's head of development Thomas Schmall said in the statement. "We are now bundling our power in Salzgitter, with the aim of encouraging innovation."
VW's future battery hub at Salzgitter will start production in 2025 for the company's volume cars. Its initial phase will have annual capacity of 20 gigawatt hours, rising to 40 gigawatts at a later stage.
The company plans to employ about 2,500 workers at the site, who will mostly be retrained staff from a nearby engine plant.
Over the next five years, VW, which has previously said its open to listing its battery business, plans to invest around 52 billion euros in the development and production of new electric vehicles, the industry's biggest push.
VW said it was looking at locations for battery cell plants in Spain and eastern Europe and the exact sites would be determined in the first half of 2022.
The Czech Republic, Slovakia, Poland and Hungary are in the running for one of the plants to be opened in 2027.
Reuters contributed to this report
