German carmaker Volkswagen and its partners will invest EUR 10 billion to expand production capacity for EVs and EV batteries in Spain. In particular, Volkswagen will build a new gigafactory (EV battery plant) in the country. The announcement on the EUR 10 billion investment was made on May 5 and first reported by other news outlets such as Reuters. Volkswagen already revealed the gigafactory project at an earlier time. However, as indicated in the latest announcement, the carmaker will commit EUR 3 billion more than it originally planned.

At the same time of the announcement, Volkswagen and Spanish utility Iberdrola publicly presented a strategic collaboration plan to supply renewable electricity to the proposed EV battery plant in Spain. Iberdrola will invest around EUR 500 million to build a PV power plant and the related energy infrastructure so that a portion of the electricity supply for the EV battery plant will be based on renewable energy. Ignacio Galán, chairman of Iberdrola, said that the collaboration will prevent the emission of 200,000 metric tons of CO2 per year. 

This March, Volkswagen disclosed that it would invest around EUR 7 billion to set up an EV battery plant in Spain and produce EVs at two existing car manufacturing sites in the country. However, other partners later entered the picture, and the total investment in the project was raised to EUR 10 billion. Herbert Diess, CEO of Volkswagen, said “Spain is the second largest automaker base in Europe” and is where his company will concentrate its efforts in fleet electrification. Diess added that his company intends to build a complete a supply chain for EV batteries, from lithium extraction to battery module manufacturing

According to Volkswagen’s plan, the construction of the EV battery plant will begin in the first quarter of 2023. The plant is scheduled to enter operation in 2026, and it will employ as many as 3,000 workers by the end of 2030. Located in Sagunto (a municipality in the province of Valencia), the plant will have a production capacity of 40GWh per year.

Part of the funding for the new gigafactory could come from Spain’s COVID-19 relief program known as Strategic Projects for Recovery and Economic Transformation (shortened as “PERTE” in Spanish). PERTE is also a part of a larger recovery and transformation scheme that is being implemented across the EU. Earlier this March, the Spanish government issued a tender through PERTE for expanding domestic EV production. Volkswagen’s Spanish unit SEAT has made a bid in the hope of receiving the loans and grants provided by the program. The winning bids will be announced within this year. Regarding the allocation of the EUR 10 billion investment, EUR 3 billion will go to the proposed EV battery plant in Sagunto and EUR 4 billion will go to local EV plants. How the remainder will be used has yet to be disclosed. Volkswagen is currently expanding its EV production lines in the Spanish cities of Martorell and Pamplona.