Siemens backs Northvolt's $5 billion Swedish battery plant

ZURICH (Reuters) - Siemens SIEGn.DE has become the latest company to contribute to the Northvolt project to build Europe's largest lithium-ion factory in northern Sweden.

FILE PHOTO: A logo of Siemens is pictured on a building in Mexico City, Mexico, May 16, 2017. REUTERS/Edgard Garrido

The German engineering company has offered its digital enterprise technology to help build the factory, which will become Siemens’ preferred supplier for lithium ion batteries when production starts in 2020.

Siemens said it will invest 10 million euros ($11.73 million) into the project which already received support from its Swiss rival ABB ABBN.S in September last year.

In January Volkswagen-owned VOWG_p.DE truckmaker Scania also agreed to invest 10 million euros in the 4 billion euro ($5 billion) factory.

Northvolt intends to build Europe’s biggest battery cell plant in Sweden, which--with ambitions to produce 32 gigawatt-hours of battery packs a year by 2023--would create a project to rival the scale of Tesla’s Gigafactory.

Europe’s battery cell demand is projected to reach 200 gigawatt hours by 2025, a market worth an estimated 250 billion euros annually, according to previous comments from the European Commission.

Lithium ion batteries are used in a host of applications, from cars to power tools and home appliances.

“The European industry is moving rapidly towards electrification,” Northvolt Chief Executive Peter Carlsson said in a statement.

"With its world-class expertise within electrification, automation and digitalisation, Siemens will become an important technology partner, supplier and customer to Northvolt in this coming transition," added the executive who used to work for Tesla TSLA.O.

Northvolt intends to raise about 4 billion euros ($4.7 billion) to fund the project through a series of financing rounds, with the first one planned for next year.

It remains unclear whether there is investor appetite in Europe to fund a domestic project. The market is dominated by Japanese firms Panasonic 6752.T and NEC 6701.T, Korea's LG 003550.KS and Samsung 005930.KS and China's BYD 002594.SZ and CATL 300750.SZ, and Tesla.

Reporting by John Revill in Zurich and Esha Vaish in Sweden; editing by Brenna Hughes Neghaiwi