Nissan will invest more than 200 billion yen ($1.8 billion) in building new electric-vehicle battery plants in the U.K. and Japan, according to a report.

The Japanese automobile giant and a Chinese-owned battery maker aim to start delivering batteries to power 700,000 electric vehicles a year from two plants as early as 2024.

The plants will be operated by Envision AESC — the world’s seventh-largest supplier of EV batteries — which Nissan 7201, +1.60% holds a 20% stake in, according to the report, with all of the batteries to be supplied to the Renault–Nissan–Mitsubishi alliance. Nissan has an existing plant in Sunderland, in northeast England.

According to the report, Envision will contribute funding, and Nissan is considering joint investments as well as subsidies from the U.K. and Japanese governments to finance the project.

Nissan appears to be aiming to tie up with China’s Contemporary Amperex Technology, known as CATL 300750, +4.20%, or South Korea’s LG Chem 051910, -0.37% — two of the world’s largest battery suppliers.

Nissan’s move comes as car makers around the world want to increase access to electric-vehicle batteries amid a looming supply pinch. In a report published in March, analysts at Swiss bank UBS UBS, -0.30% predicted that the required battery-cell supply to meet the increased demand will result in “regional tightness this year and global shortages by 2025.”

In order for electric-vehicle market penetration to reach 20% in 2025 and 50% in 2030, as projected, battery-cell supplies need to increase 70% more than previously forecast over the next decade, according to UBS. A supply shortage is imminent, the analysts said.

In this fast moving space, the UBS analysts said that incumbent battery-cell makers are at a significant cost advantage, and predicted that there will be a consolidated structure with two-thirds of the market being controlled by three top players: CATL, LG Chem, and Panasonic 6752, +1.03%.

Nissan has ambitious plans to pivot its business model to focus on electric vehicles. With the goal of being carbon-neutral by 2050, the Japanese auto giant aims for 100% of its new vehicle sales in key markets to be electrified by the early 2030s.

The group is already a notable presence in the European electric-vehicle market — the world’s largest behind China.

According to automotive analyst Matthias Schmidt, the publisher of the European Electric Car Report, Nissans made up 4% of electric vehicles registered in 18 key European markets in 2021, to the end of April. Those 18 markets include 14 major European Union states plus the U.K., Norway, Iceland, and Switzerland.

The Renault–Nissan alliance as a whole controls around 12.5% of the European electric-vehicle market, according to Schmidt, putting it behind only Volkswagen Group VOW, -0.19% and Stellantis STLA, +2.70% — the group formed earlier this year from the merger of Fiat Chrysler and PSA Group.

Nissan has ambitious plans to pivot its business model to focus on electric vehicles. With the goal of being carbon-neutral by 2050, the Japanese auto giant aims for 100% of its new vehicle sales in key markets to be electrified by the early 2030s.

The group is already a notable presence in the European electric-vehicle market — the world’s largest behind China.

According to automotive analyst Matthias Schmidt, the publisher of the European Electric Car Report, Nissans made up 4% of electric vehicles registered in 18 key European markets in 2021, to the end of April. Those 18 markets include 14 major European Union states plus the U.K., Norway, Iceland, and Switzerland.

The Renault–Nissan alliance as a whole controls around 12.5% of the European electric-vehicle market, according to Schmidt, putting it behind only Volkswagen Group VOW, -0.19% and Stellantis STLA, +2.70% — the group formed earlier this year from the merger of Fiat Chrysler and PSA Group.

The Renault–Nissan alliance is just ahead of Tesla TSLA, +4.58% in terms of European EV market share, with the U.S. EV group holding 11.9% market share as of the end of April.