German Chancellor Angela Merkel has broken ground on a new £431 million (€500m) factory in Germany that is planned to assemble lithium ion battery packs for Mercedes-Benz’s upcoming line-up of EQ-branded electric cars as well as its Smart Electric Drive models, new electric commercial vehicles and future hybrid models.

Mercedes-Benz unveils electric EQA hatchback concept

The new facility in Kamenz, Germany, is described as Europe’s first true electric car battery making 'gigafactory' and marks the second stage in a broader €1 billion investment made by Mercedes-Benz parent company Daimler in its Accumotive energy storage subsidiary as it prepares to enter the electric car ranks with its first unique styled EQ-badged model, previewed by the Generation EQ SUV, in 2019.

Mercedes EQ concept - first drive

Daimler hopes the establishment of the new plant will enable Mercedes-Benz to challenge electric car market leader Tesla, which is nearing completion of its battery Gigafactory in co-operation with Japanese electronics giant Panasonic in Nevada, USA, by providing the basis for a significant reduction in battery production costs together with increases in the energy density levels required to see the new generation of electric cars reach a promised range of more than 300 miles.

“The automotive industry is facing a fundamental transformation,” said Mercedes-Benz chairman, Dieter Zetsche. “The battery factory in Kamenz is an important component in the implementation of our electric offensive. By 2022, we will have more than ten purely electric passenger cars. We also continue to drive forward the hybridisation of our fleet. Under the EQ brand, we are creating a holistic ecosystem for e-mobility.”

Accumotive produces battery modules using individual cells supplied by a number of different companies, including Samsung SDI and LG. Earlier plans by Daimler to produce its own cells were shelved when it shuttered its Litec battery development subsidiary in 2015.

The new battery facility, which is located some 37 miles north of Dresden, in Eastern Germany, is scheduled to start production in mid-2018. Covering an area of around 20 hectares, it will quadruple the production and logistics of Accumotive’s current operations.

As well as producing batteries for future Mercedes-Benz electric cars, Accumotive will also provide batteries for the company’s new 48-volt equipped models, starting with the facelifted S-Class this summer.

Global battery production capacity is set to increase almost three-fold by 2021, according to electric car industry analysts, reaching 278GWh of capacity compared to some 103GWh today.