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A Volvo XC40 Recharge car on display at the 38th Thailand International Motor Expo 2021.
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Volvo Cars and Northvolt said Friday they would build a battery manufacturing plant in Gothenburg, Sweden, with construction set to begin in 2023.

According to the companies, the facility is set to “have a potential annual cell production capacity of up to 50 gigawatt hours.” This would equate to supplying enough batteries for around 500,000 cars every year, they said.

The batteries produced by the plant will be “specifically developed” so they can be used in fully-electric cars from Volvo and Polestar, which is joint owned by Volvo Cars and China’s Geely Holding Group.

The so-called gigafactory in Gothenburg will dovetail with a planned research and development center that was announced in December 2021 as part of an investment of roughly 30 billion Swedish krona, or $3.29 billion.

Gigafactories are facilities that produce batteries for electric vehicles on a large scale. Tesla CEO Elon Musk has been widely credited as coining the term.

“The battery cell production joint venture between Northvolt and Volvo Cars will be a significant player in European battery cell production and will represent one of the largest cell production units in Europe,” the companies said in statements published on their websites on Friday.

“Volvo Cars and Northvolt have appointed former Tesla executive Adrian Clarke to lead the production company,” they added.

Plans to develop a battery plant were announced in December, but a specific location was not confirmed at the time. The R&D center is due to start operations this year, with the battery production facility scheduled to be up and running in 2025.

In March 2021, Volvo Cars said it planned to become a “fully electric car company” by the year 2030. Northvolt is a Stockholm-headquartered company which was founded in 2016. It has attracted investment from Goldman Sachs and Volkswagen, among others, and is aiming for 150 GWh of cell output per year by 2030.

During a question and answer session on Friday, Northvolt CEO Peter Carlsson and Javier Varela, Volvo Cars’ head of engineering and operations, were asked if there would be an expansion of the joint venture to parts of the world such as Asia and America.

Varela emphasized it was a step by step process. “Today it’s clear that we are focusing on our European needs and [it’s] to be discussed in the future how we will secure capacity in other areas,” he said.

For his part, Carlsson said: “Obviously, from day one we have had a big European focus and our infrastructure is here. But it’s … also pretty clear that the electrification platforms are really becoming global and the rollout of product portfolios … [is] becoming global.”

“However, batteries are heavy to ship and they’re also, to some extent, a bit complicated in terms of logistics since there … [are] certain hazardous goods requirements when you ship batteries.”

This meant that there would be a regionalization of the supply chain, he said. “That’s the reality, also for us, that we need to continue exploring.”

Friday’s announcement comes at the end of a week in which the European Automobile Manufacturers’ Association said 878,432 new battery electric passenger cars were registered in the EU last year, compared to 538,734 in 2020.

For new passenger cars, the market share for battery electric vehicles stood at 9.1% in 2021. Despite registrations for new gasoline and diesel vehicles falling, the ACEA said “conventional fuel types still dominated EU car sales in terms of market share in 2021, accounting for 59.6% of all new registrations.”