Chinese electric battery company CATL and automaker Stellantis will build a major battery factory in northern Spain, the partners announced Tuesday.

They said the plant will be located in Zaragoza and start producing lithium iron phosphate batteries by the end of 2026.

The joint venture represents an investment of 4.1 billion euros ($4.3 billion), they said in a statement. The plant plans to be carbon neutral, apparently by making use of Spain’s ample supplies of solar, wind and water power.

The announcement comes after CATL and Stellantis agreed in November 2023 to collaborate on fabrication of batteries to help build electric cars in Europe.

European carmakers are struggling to keep up with their Chinese counterparts in electric cars, a key pillar of the green transition that the European Union is pursuing. The bloc’s 27 member states won’t be able to produce internal combustion cars after 2035.

The EU, like the United States, is applying tariffs on electric vehicles imported from China to help protect domestic producers and encourage Chinese carmakers to move production to Europe and create local jobs.

CATL and other Chinese battery makers are far ahead in the critical area of producing batteries for electric vehicles. Northvolt, Europe’s great hope for catching up, filed for bankruptcy last month. CATL is already producing batteries at two European factories in Germany and Hungary.

The deal comes a day after Spanish Prime Minister Pedro Sánchez met with CATL Chairman Robin Zeng in Madrid. Spain produces the second most cars in the EU after Germany. Sánchez posted on X that he was “very satisfied” when the deal was made official.

Spain’s Minister of Industry Jordi Hereu applauded the announcement, which he said received public funding from Europe’s post-pandemic recovery plan that includes Spain’s ambitious plan to shift to electric vehicles.

“We all have a lot riding on the transition toward an electric transport model,” Hereu told reporters. “Therefore we consider this investment to be a great sign that the car industry believes in Spain.”

Stellantis includes the Chrysler, Citroen, Dodge, Jeep, Peugeot, Fiat, Opel and Alfa Romeo brands, among others. In Spain, Stellantis group has car factories in Zaragoza, Vigo and Madrid.

The production of electric vehicles in Spain has risen from just 16,000 models in 2019 to 323,000 in 2023, but that is still 13% of the total output of 2.4 million vehicles produced, according to ANFAC, the Spanish Association of Automobile and Truck Manufacturers. Germany, which is now seeing layoffs in its car industry, led Europe with 4.1 vehicles of all types produced in 2023, ANFAC said.

Volkswagen Group, through its Spanish affiliate SEAT, announced in 2022 its plans to build an electric battery plant in Spain’s eastern Valencia region.