SAGUNTO, Spain, May 5 (Reuters) – German carmaker Volkswagen AG (VOWG_p.DE) and its partners will invest 10 billion euros ($10.6 billion) to manufacture electric vehicles and batteries in Spain, said Thursday its chief executive, 3 billion euros more than he had previously committed.

The company also announced a partnership agreement with the largest Spanish electricity company Iberdrola (IBE.MC), which will set up a solar park to supply part of the battery factory to be built in the municipality of Sagunto near of Valencia.

Iberdrola will invest 500 million euros in the electrification plan, its CEO Ignacio Sanchez Galan told reporters, without giving further details.

Volkswagen announced in March that it would invest 7 billion euros to build a battery factory and produce electric vehicles at its two car factories in Spain, but CEO Herbert Diess said that figure had been increased to 10 billion with new partners on board. Read more

“We will electrify the second largest automaker in Europe (Spain) with a new battery giga-factory and the production of electric cars in two factories,” Diess said at an event in Sagunto, adding that the plan was to create “an ecosystem of suppliers from lithium mining to battery assembly”.

Diess speaking during a visit with Spanish Prime Minister Pedro Sanchez to the site where the plant will be built.

The German automaker aims to start building the 40 gigawatt-hour (GWh) plant in the first quarter of 2023, with mass production to begin by 2026. By 2030, the site will employ more than 3,000 people, Volkswagen said. Read more

Spain, Europe’s largest automaker after Germany, launched a bidding process last month for around 3 billion euros in loans and grants to promote the production of electric vehicles ( VE). Volkswagen and its Spanish unit SEAT have submitted an offer.

The winners of the LOSS funds, as the program made up mostly of European Union pandemic relief funds are called, will be chosen this year.

The company will invest 3 billion euros in the Sagunto plant, an additional 3 billion euros in four SEAT factories, including the Martorell plant near Barcelona, ​​and 1 billion in Pamplona, ​​he said.

($1 = 0.9463 euros)

Reporting by Emma Pinedo; Additional reporting by Christoph Steitz; Editing by Bernadette Baum and Edmund Blair

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