PARIS—PSA Group and the French energy company Total have signed an agreement to create a joint venture that will build battery cells at locations in France and Germany.
The two companies have been working on the project since last year and signaled the intent to form a joint venture in January.
PSA said Sept. 3 that Yann Vincent, formerly head of industrial operations and supply chain, would be the CEO of the battery alliance, which will be called Automotive Cells Company, or ACC.
Ghislain Lescuyer, the chairman of Total's battery subsidiary Saft, will hold the same post at ACC.
PSA and Total also released a number of details about the planned factories, which will be operational in 2023 and supply PSA Group vehicles from Peugeot, Citroen, DS Automobiles and Opel/Vauxhall—and potentially cars from Fiat Chrysler Automobiles, which is working toward a merger with PSA.
Batteries produced in the factories eventually could supply 1 million vehicles per year, PSA and Total said.
One factory will be in Douvrin, France, and the other in Kaiserslautern, Germany.
PSA and Total established an R&D center in Bordeaux, France, and are building a pilot plant in Nersac, France. The sites will start operations with a total capacity of 8 gigawatt-hours, increasing to 48 by 2030, PSA and Total said.
The project received financing of about $1.5 billion euros the French and German governments, with total investment expected to be close to $6 billion.
PSA is working to create a vertically oriented supply chain for electric vehicles through partnerships. Transmissions will be built with Punch Powertrain of Belgium, and electric motors built in an alliance with Nidec of Japan.
CEO Carlos Tavares said that having control of the EV supply chain could result in cost savings of 10 percent, an important efficiency with electric vehicles expected to produce lower margins than internal combustion ones in the coming years.
The battery joint venture "gives PSA Group a competitive advantage in the context of growing sales of electric vehicles," Tavares said in a statement.
Most EVs sold in Europe use battery cells built by Asian companies such as LG Chem and CATL, whether from factories in China, South Korea and Japan, or in European plants in the case of LG. But other entrants, including several startups, are poised to join the market by 2030 as stricter emissions rules drive demand for electric vehicles.