BMW plans to source €4 billion (Dh17.28bn) worth of battery cells from Chinese battery maker Contemporary Amperex Technology Ltd (CATL) over the next few years, the car maker's purchasing head said on Monday.
The long-term contract sees €1.5bn worth of battery cells coming from a new CATL plant in Erfurt, in the eastern German state of Thuringia, Markus Duesmann said in Munich, according to Reuters.
CATL will build the battery factory in central Germany to supply the country's car industry through its transformation toward electric cars, high-end manufacturer BMW said Monday.
"We are very pleased that CATL has decided to build a factory for battery cells in Erfurt," capital of Thuringia state, the Munich-based firm said.
The contract for the plant in Erfurt is due to be signed on Monday during a visit of China's Premier Li Keqiang to Germany.
Mr Duesmann said BMW had invested in some of the costs for the factory in Germany, but declined to say how much. He said he would welcome it if other car makers also wanted to invest in the Erfurt plant.
The Chinese firm will supply the cells for the electric Mini and for BMW's upcoming "iNext" electric limousine, slated for production from 2021.
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CATL's Erfurt factory will make Thuringia "one of the most important European locations for battery technology", regional economy minister Wolfgang Tiefensee told news agency DPA.
Industrial workers' union IG Metall also hailed the deal, which it said could create around 1,000 new jobs in the high-tech sector, according to AFP.
Car makers are squeezed by looming stricter EU emissions targets and years of scandal over cars built to cheat diesel emissions tests.
German firms have been hard at work lining up their supply chains to produce huge volumes of electric vehicles, hoping to solve both problems at a stroke.
Top of the to-do list has been striking deals with battery makers and securing supplies of raw materials for the cells, especially cobalt.
As well as BMW, Mercedes maker Daimler is also weighing a deal with CATL, according to German business daily Handelsblatt, while Volkswagen already has a contract with the Chinese firm as well as with South Korea's Samsung and LG.
Politicians, industry leaders and worker representatives have frequently mooted a homegrown German option for battery production, but massive car parts supplier Bosch shied away earlier this year, calling it too risky an investment.