China's CATL to build $7.6 billion Hungary battery plant to supply Mercedes, BMW

© Reuters. FILE PHOTO: People walk past the R&D centre of Contemporary Amperex Technology Ltd (CATL) in Ningde, Fujian province, China, December 16, 2016. Picture taken December 16, 2016. REUTERS/Jake Spring/File Photo

SHANGHAI (Reuters) -China's CATL said on Friday it would build a 7.3 billion euro ($7.6 billion) battery plant in Hungary, as the world's biggest electric vehicle battery maker gears up to meet growing demand from global automakers.

CATL said that construction of the 100 GWh (gigawatt hours) plant in the eastern Hungarian city of Debrecen, its biggest overseas investment, would start this year after receiving approvals, and should last no more than 64 months.

Once built, it is set to be Europe's largest battery cell plant and CATL's second in the region, making battery cells and modules for carmakers including Mercedes-Benz, BMW, Stellantis and Volkswagen (ETR:VOWG_p).

The expansion comes as European automakers accelerate a transition to electric vehicles in their home markets, prompting surging demand for batteries from local suppliers.

It will mark "a giant leap in CATL’s global expansion", the company's founder and chairman Zeng Yuqun said in a statement

The Chinese company is also pressing ahead with plans for battery production in North America by 2026 for clients including Ford Motor (NYSE:F), Reuters reported earlier, despite tensions between Beijing and Washington.

The investment is also key for Hungary, which is becoming a major hub for electric vehicles and batteries in Europe.

Debrecen is home to a plant being built by BMW, while Volkswagen's Audi brand has a factory in western Hungary's Gyor and Mercedes-Benz operates one in Kecskemet, central Hungary.

BMW declined to comment but said it plans to release some battery related information in early September. VW and Stellantis did not immediately respond to requests for comment.

Mercedes said in a separate statement it would be the first partner to receive battery cells from CATL's Hungarian plant, and that its order marked the highest initial order volume for the site.

CATL previously said it would start supplying cylindrical cells to BMW from 2025 for its new series of electric vehicles.

The Chinese company also said it is also examining the possibility of joining forces with local partners to establish facilities for battery materials in Europe.

As of end of 2021, CATL had an annual battery production capacity of 170.39 GWh, with 140 GWh capacity under construction. The company said previously it aims to install a total of 670 GWh annual capacity by 2025.

($1 = 0.9708 euros)