Volvo Car Group and Swedish battery company Northvolt announced plans to establish a joint venture, aimed at the development and the production of sustainable batteries to power the next generation of electric Volvo and Polestar cars.

According to the companies, the 50/50 joint venture will set up a research and development in 2022, and establish a new gigafactory in Europe with a potential capacity of up to 50 gigawatt hours (GWh) per year, with production scheduled to start in 2026.

The new partnership comes as auto manufacturers globally are ramping plans to electrify their product lineups, driving increasing battery demand. Last week, for example, auto giant GM announced plans to ramp its investments in electric and automotive vehicles to $35 billion through 2025. Volvo Cars’ has set an ambitious target to sell only electric cars by 2030,  with 50% of 2025 sales to be fully electric, and the remainder hybrids.

According to Volvo, the company’s transition towards becoming a fully electric car maker is part of its climate plan, which aims to consistently reduce the life cycle carbon footprint per car through concrete action.

Håkan Samuelsson, Chief Executive at Volvo Car Group, said:

“By working with Northvolt we will secure a supply of high-quality, more sustainable battery cells for our pure electric cars. Working closely with Northvolt will also allow us to strengthen our in-house development capabilities.”

The new Gigafactory is planned to be powered by 100% clean energy and is expected to open 3,000 new workplaces. The first car to feature battery cells developed through the joint venture will be The Volvo XC60 model. Earlier this year, Northvolt raised nearly $3 billion to fund a major expansion of its Swedish Gigafactory, following a $1.6 billion capital raise last year, for the development of another two giga factories for lithium ion battery cell production.

As part of their plans, in 2024, Volvo Car Group will also source 15 GWh of battery cells per year from existing Northvolt Ett battery plant in Sweden.

Peter Carlsson, Co-Founder and CEO of Northvolt, said:

“Volvo Cars and Polestar are industry leaders in the transition to electrification and perfect partners on the journey ahead as we aim to develop and produce the world’s most sustainable battery cells. We are proud to become their exclusive battery cell production partner in Europe.”