Just a few weeks after unveiling its own new battery Gigafactory for electric vehicles in Germany, Daimler is now announcing a new $740 million battery factory project in China.

The new factory will support the production of batteries for electric vehicles under the Mercedes-Benz brand.

It’s the first major project as part of Daimler’s new investments in electric vehicles through its joint-venture with BAIC in China.

Markus Schäfer, Member of the Divisional Board of Mercedes-Benz Cars, Production and Supply Chain, commented on the announcement:

“Building another premium eBattery factory is the next step in the implementation of our electric strategy. Thus, we have the first foreign location in our global battery production network. The local production of batteries is crucial in order to meet the demand for electric vehicles flexibly and efficiently,”

While Daimler is making significant investments in battery production, they are still not producing battery cells. Like the one in Germany, the new factory will produce battery modules and packs, but they will be sourcing the cells from elsewhere.

The German automaker wouldn’t confirm from which supplier, but they did say that the cells will be sourced from China.

Berenberg Bank analyst Alexander Haissl recently expressed doubts about the sourcing strategy of traditional automakers:

“Clear visibility about high-volume cell-sourcing strategies continue to elude traditional manufacturers, although we expect announcements for large facilities to eventually emerge to resolve the key issue of battery supply constraints,”

Daimler will be able to choose from several different battery cell manufacturers to supply its new factory. Several companies, like Panasonic andCATL, have been building battery cells factories in China.

Hubertus Troska, Member of the Board of Management of Daimler AG, responsible for Greater China, also commented on the announcement:

“We are investing in the world’s largest market for Battery Electric Vehicles, By 2025, the Chinese market will have a substantial share in sales of Mercedes-Benz electric vehicles. Therefore, local production will be key to the success of our EV portfolio, and crucial to flexibly serving local demand for electric vehicles.”

They expect production at the new facility to start in 2020.

The news comes just as Tesla confirmed working with the Shanghai Government to establish its own manufacturing facility in the region.

A clear rush to invest in electric vehicles is happening in China. Tesla wants to tap into what is now the world’s biggest auto market and legacy automakers are speeding up their plans to match the country’s ZEV mandate. Automakers need zero-emission vehicles (ZEVs) to represent 8% of new car sales as soon as 2018 and quickly ramp up to 12% by 2020.

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