Mercedes-Benz’ parent company Daimler has invested £431 million (approximately Rs 3,137 crore) in a new factory in Kamenz, Germany, which will assemble lithium-ion battery packs for the carmaker’s upcoming line-up of EQ-branded electric cars, along with its Smart Electric Drive models, new electric commercial vehicles and future hybrid models.

German Chancellor Angela Merkel broke ground on the new facility, which has been described as Europe’s first true electric car battery making 'gigafactory'. The factory marks the second stage in a broader €1 billion (approximately Rs 7,277 crore) investment made by Daimler in its Accumotive energy storage subsidiary as it prepares to enter the electric car ranks with its first unique-styled EQ-badged model in 2019.

Daimler hopes the establishment of the new plant will enable Mercedes-Benz to challenge electric car market leader Tesla, which is nearing completion of its battery gigafactory in cooperation with Japanese electronics giant Panasonic in Nevada, USA. The new factory is expected to provide the company the basis for a significant reduction in battery production costs together with increases in the energy density levels required to see the new generation of electric cars reach a promised range of more than 483km.

“The automotive industry is facing a fundamental transformation,” said Mercedes-Benz chairman Dieter Zetsche. “The battery factory in Kamenz is an important component in the implementation of our electric offensive. By 2022, we will have more than 10 purely electric passenger cars. We also continue to drive forward the hybridisation of our fleet. Under the EQ brand, we are creating a holistic ecosystem for e-mobility.”

The new battery facility is scheduled to start production in mid-2018. Covering an area of around 20 hectares, it will quadruple the production and logistics of Accumotive’s current operations.

As well as producing batteries for future Mercedes-Benz electric cars, Accumotive will also provide batteries for the company’s new 48-volt equipped models, starting with the facelifted S-class.

At the ceremony marking the start of construction of a new Accumotive factory, Mercedes-Benz confirmed its upcoming line-up of electric cars would be produced “within the global network of Mercedes-Benz on four continents”.

The first EQ model, the production version of the Generation EQ SUV, will roll off that line at Mercedes-Benz’ plant in Bremen, Germany, in 2019. Additionally, the German carmaker also confirmed that luxury-class EQ models will be produced at its plant in Sindelfingen, Germany.  

Mercedes-Benz expects electric cars will make up between 15 and 25 percent of its total sales by 2025.