STOCKHOLM -- Volvo Cars plans a joint venture with Swedish battery maker Northvolt to develop sustainable batteries for its electric cars and set up a gigafactory for production.
The companies aim to set up an R&D center in Sweden to begin operations in 2022 and start a gigafactory in Europe with a potential capacity to produce up to 50 gigawatt hours (GWh) per year in 2026.
"Working closely with Northvolt will also allow us to strengthen our in-house development capabilities," Volvo CEO Hakan Samuelsson said in a statement on Monday.
Volvo aims to sell 50 percent pure EVs by the middle of this decade, and by 2030 it aims to sell only full-electric cars.
An electric successor to the XC60 model will be the first car to use battery cells developed through the joint venture, Volvo said.
Batteries from the joint venture will also be used by Volvo's sister brand Polestar.
"For Polestar, it gives a further boost to its European growth ambitions and underlines its commitment to the Polestar 0 project which aims to create a truly climate neutral vehicle by 2030," Volvo said.
Volvo's chief technology officer, Henrik Green, said developing the next generation of battery cell technology in-house with Northvolt will allow the automaker to design batteries specifically for Volvo and Polestar drivers.
Volvo said it will reveal more details on its future technology roadmap during its tech day on June 30.
Northvolt will become Volvo's exclusive battery cell production partner in Europe.
The gigafactory will be powered by clean energy and is expected to employ around 3,000 people. The location of the plant has yet to be decided, Volvo said.
Northvolt raised $2.75 billion in equity this month to expand capacity at the factory it is building in northern Sweden, and Volvo plans to source battery cells from that battery plant starting in 2024.
Volkswagen is Northvolt's biggest shareholder and the battery maker has also won contracts worth billions from companies such as BMW and Scania.
Battery makers are scrambling to keep up with demand as automakers switch to electric in order to reduce planet-warming carbon emissions.
Automotive News Europe contributed to this report