Stellantis and Chinese battery giant CATL are joining forces to construct a massive electric vehicle (EV) battery factory in Zaragoza, Spain. This €4.1 billion ($4.33 billion) joint venture represents a significant investment in Europe’s EV landscape and is poised to be one of the continent’s largest battery production facilities.
The strategically located plant is expected to commence production by the end of 2026, boasting a potential capacity of 50 gigawatt hours (GWh). This output could power approximately 700,000 EVs daily, according to the Electric Vehicle Database. The facility will focus on producing lithium iron phosphate batteries, known for their affordability and suitability for small to medium-sized vehicles.
This ambitious project comes at a critical juncture for the European automotive industry. Carmakers are grappling with elevated costs, intense competition from Chinese manufacturers, and a slower-than-anticipated transition to electric vehicles. In 2023, around 2.4 million new electric cars were registered in the EU, a modest increase from 2 million in 2022, according to the European Environment Agency.
The final capacity of the Zaragoza plant will be contingent on the growth of the EV market in the region and continued support from government authorities. Both Stellantis and CATL had initially announced their intention to establish a European factory a year ago. This collaboration underscores Europe’s proactive efforts to attract EV battery manufacturers and reduce reliance on Asian suppliers, while also competing with the United States in the race for green subsidies.
Spain’s abstention from a vote on imposing additional tariffs on Chinese EV imports, coupled with Prime Minister Pedro Sanchez’s call for the EU to reconsider penalizing Chinese-made EVs, likely played a role in securing the factory location. In contrast, other car-producing nations like Italy and France voted in favor of the tariffs, while Germany opposed them.
This decision aligns with reports that Chinese companies require Beijing’s approval for significant overseas investments, and China has discouraged major investments in European countries supporting additional tariffs. Spain, Europe’s second-largest car producer, launched a €5 billion plan in 2020 to attract EV and battery production, leveraging EU pandemic recovery funds. Stellantis has already received approximately €300 million from this initiative.
Several factors contributed to CATL’s selection of Zaragoza. Spain’s robust auto industry, generous government subsidies, access to renewable energy sources, and lower labor costs all enhanced its attractiveness compared to other European locations. Abundant wind and solar power resources make Spain an ideal location for energy-intensive battery production. Solar energy, for instance, is significantly cheaper in Spain than in Central Europe. Aragon, the region hosting the plant, boasts renewable energy sources accounting for 80% of its installed power capacity, attracting major investments from tech giants like Microsoft and Amazon.
In contrast, other planned battery projects in the EU have encountered challenges related to bureaucratic hurdles, production issues, and slower-than-projected EV demand. Notably, Sweden’s Northvolt recently filed for Chapter 11 bankruptcy protection in the U.S. due to customer loss and funding shortages. The CATL-Stellantis venture aims to bring innovative battery production to a region already recognized for its commitment to clean and renewable energy.
The Zaragoza plant marks CATL’s third factory in Europe, complementing its existing wholly-owned facilities in Germany and Hungary. The German factory, operational for six years, represents a €1.8 billion investment with a planned capacity of 14 GWh. The Hungarian plant, under construction, involves a €7.3 billion investment and a targeted capacity of 100 GWh.
This venture is integral to Stellantis’ strategy to ramp up EV production at its plants in the Aragon and Galicia regions. Stellantis is also a major investor in the ACC battery-making joint venture with Mercedes and TotalEnergies. ACC has initiated production at a gigafactory in France, while the development of two other gigafactories in Italy and Germany has been delayed due to sluggish EV demand.
