Swedish battery maker Northvolt has inked a deal worth north of $3.5bn with Volvo to open a new European gigafactory and a Scandi research centre.

While Northvolt and Volvo have stayed mum on the value of the deal, Dagens Industri reports that the deal could be worth SEK30bn ($3.5bn).

Earlier in June, Northvolt announced it had raised an $2.75bn equity round to expand its gigafactory, Northvolt Ett, in Skellefteå in Northern Sweden from an annual capacity of 40 to 60 GWh. The deal saw the clean energy company’s valuation skyrocket from $3.9bn to $11.75bn

The deal is part of Volvo’s ambition to phase out non-electric cars entirely by 2030, a goal announced in March.

“By working with Northvolt we will secure a supply of high-quality, more sustainable battery cells for our pure electric cars,” said Håkan Samuelsson, chief executive at Volvo Car Group. “Working closely with Northvolt will also allow us to strengthen our in-house development capabilities.”

In order to achieve this milestone, the Northvolt deal will see Volvo Car Group source 15 GWh of battery cells per year from the existing Northvolt Ett battery plant starting in 2024.

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By GlobalData

More importantly, the joint venture will also see the establishment of a new gigafactory in an unspecified European country. The new site is estimated to have a potential capacity of up to 50 Gwh per year. Production is set to start in 2026.

Volvo Car Group and Northvolt will also break ground to establish a research and development centre in Sweden that will begin operations next year.

The centre will aim to develop new types of battery cells and look for ways to integrate them in vehicles, specifically for Volvo and Polestar cars.

“Volvo Cars and Polestar are industry leaders in the transition to electrification and perfect partners on the journey ahead as we aim to develop and produce the world’s most sustainable battery cells,” said Peter Carlsson, co-founder and CEO of Northvolt. “We are proud to become their exclusive battery cell production partner in Europe.”

Carlsson co-founded the clean energy startup in 2016 after having previously clocked up experience as an executive at Elon Musk’s electric car company Tesla.

Prior to the Volvo deal, Northvolt had secured $27bn worth of contracts from key customers, including BMW, Fluence, Scania and Volkswagen.

A recent GlobalData thematic research report estimated that worldwide fitment of advanced batteries would jump from 9.7 million units in 2020 to nearly 68 million by 2035.