Volkswagen is building its second European battery cell factory in Spain.

The factory, with a production capacity of 40 gigawatt hours (GWh) per year and more than 3,000 employees, is to be built in Valencia on the country's Mediterranean coast, the group announced on Wednesday.

Together with partners, Volkswagen wants to invest more than seven billion euros there.

The project, which is still subject to final approvals, should encompass the entire e-mobility value chain.

"This project is of great importance - for Volkswagen, for Spain and for the whole of Europe," said CTO Thomas Schmall.

"We have the goal of electrifying Spain and are ready, together with external suppliers, to invest more than seven billion euros in the electrification of our Martorell and Pamplona plants and in the localization of the battery value chain in Valencia." Wayne Griffith, Head of Spanish VW subsidiary Seat said the more than seven billion euros would be the largest industrial investment in Spanish history.

Production also in Salzgitter

By the end of the decade, Volkswagen intends to open six large factories in Europe with a total capacity of 240 gigawatt hours (GWh).

The Wolfsburg-based company recently combined its battery activities in a separate company in order to make them eligible for the capital market.

By the end of the decade, the division is expected to generate sales of around 20 billion euros.

According to earlier information, Schmall expects costs of 25 to 30 billion euros for the construction of the cell factories planned in Europe and for securing the necessary quantities of raw materials.

The Wolfsburg residents only want to do part of it themselves.

The car company is investing two billion euros alone to ramp up series production of battery cells for the volume segment at the Salzgitter site.

Gotion Hightech from China is a partner there.

Valencia is Volkswagen's second battery location and the first outside of Germany.

VW covers the need for premium cells through the Swedish battery specialist Northvolt in Skelleftea.

Eastern Europe is an option for another cell factory.

Lower Saxony is also hoping for another battery cell plant.

Northvolt recently announced the construction of a cell factory with an output of 60 gigawatt hours in Heide in Schleswig-Holstein.