Volkswagen Group is deepening its partnership with Chinese battery manufacturer Gotion High-Tech as it accelerates plans to produce lower-cost electric-vehicle batteries in Europe and reduce its reliance on external suppliers.

Under the expanded agreement, Gotion will invest €1.1 billion for a 49% stake in Volkswagen Group’s battery plant in Valencia, Spain. Volkswagen’s battery division, PowerCo, will retain a 51% controlling stake.

The facility is intended to become a European production hub for lithium-iron-phosphate (LFP) batteries, a chemistry increasingly used for more affordable electric vehicles.

The agreement also covers battery production and materials projects in Slovakia and Morocco. PowerCo will invest around €470 million for 49% stakes in Gotion-led ventures.

The stake also includes a battery-cell facility in Surany, Slovakia, and a planned LFP cathode-material plant in Kenitra, Morocco. Gotion will retain 51% ownership of both projects.

The deal expands a relationship that began in 2020, when Volkswagen acquired a stake in Gotion. Volkswagen currently owns around 24% of the Chinese battery maker but plans to sell a 5.3% holding as part of a wider portfolio restructuring.

The agreement strengthens cooperation across Europe and North Africa while supporting Volkswagen’s strategy to expand its battery manufacturing capabilities and develop more cost-effective EV technology.