BATTERY maker Contemporary Amperex Technology Ltd. (CATL) will build its first production site in Europe in Germany, agreeing to a major contract with BMW to supply lithium-ion batteries.

Europe’s lack of its own production capabilities for the cells that power electric cars has prompted warnings that it could leave its car industry exposed and too reliant on others.

A contract to build the new plant was signed Monday during a visit to Germany by China’s Premier Li Keqiang.

Around 240 million euros (US$280 million) will be invested in the first phase of the project, Wolfgang Tiefensee, Thuringia’s minister of economic affairs, told journalists.

BMW plans to source 4 billion euros of battery cells from CATL over the next few years, with 1.5 billion euros coming from the new site in Erfurt in eastern Germany, the carmaker’s purchasing head, Markus Duesmann, said.

CATL, the world’s largest maker of battery cells for electric vehicles, said the new factory was just its first step in Europe.

“We want to supply all the OEMs (manufacturers) in Europe,” chairman Robin Zeng said. “If the Thuringia project is successful then we can consider other locations.”

The CATL factory will create about 600 jobs and reach production of 14 gigawatt hours (GWh) by 2022. CATL reached shipments of 12 GWh in 2017.

German Chancellor Angela Merkel said the CATL investment was a good step but said it did not rule out Europe eventually competing with the Chinese. “If we could do it ourselves, then I would not be upset,” Merkel said.

The VDMA engineering industry association said it hoped CATL’s investment could help drive further investment in battery technology in Europe.

(SD-Agencies)