STOCKHOLM -- Sweden's Northvolt said it will invest several billion euros to build an electric-vehicle battery cell plant in Germany, after speculation that the company could divert planned investment to the United States.
Northvolt said it is set to pick Heide in northern Germany for its factory as long as subsidies are approved.
Spokespeople for Northvolt and the German government said the precise investment and funding amounts were not finalized and were subject to approval from the European Commission.
Northvolt could invest around 3-5 billion euros ($8.8 billion) in the plant and receive around half a billion euros in German subsidies, according to two sources familiar with the matter.
The battery maker, alongside Volkswagen, is the furthest ahead among just a handful of European players paving the way for a home-grown battery industry. Currently a large chunk of planned battery cell capacity in Europe is planned by Asian companies.
In a further win for Europe, Taiwan's ProLogium said on Friday it had picked France for its first overseas battery plant.
The subsidies for Northvolt's battery plant, if approved, would be the first granted by Germany under the European Union's Temporary Crisis and Transition Framework, developed to support green industrial projects as Europe scrambled to provide a competitive offer to U.S. subsidies provided by the Inflation Reduction Act.
"The EU-Commission opened up a clear path towards securing important industrial investments in Europe," German Economy Minister Robert Habeck said in a statement.
The plant, due to begin delivery in 2026, will ramp up to 60 gigawatt hours of capacity -- enough to supply around 1 million electric vehicles with battery cells every year -- more than each of VW's planned plants in Germany and Spain but below CATL's mega-investment in Hungary of a 100 gigawatt-hour plant.
Northvolt's investment will create 3,000 direct jobs in Heide and thousands more in the surrounding industry and service sector. Local councils this week approved the draft development plan for the plant, clearing a major administrative hurdle.
Northvolt and the state of Schleswig-Holstein signed a memorandum of understanding in March 2022 to develop a battery plant in the region but the company later said it may prioritize expansion in the U.S. ahead of Europe in light of more favorable subsidies and lower energy costs.
A second plant could also be constructed in parallel elsewhere, a spokesperson said, indicating the decision to build in Germany did not exclude the possibility of a further plant in North America.
While Europe has been able to attract big investments for the chip industry from the likes of Intel with lure of subsidies, the U.S. has offered major tax subsidies to cut carbon emissions and boost domestic manufacturing.