Volvo Cars and Northvolt will set up a joint research and development (R&D) center in Gothenburg as part of a 30 billion Swedish Kronor ($3.3 billion) investment in battery development and manufacturing.

In June, the Swedish companies announced plans for a joint venture to develop batteries for electric vehicles, including setting up an R&D center for developing new battery technology and a gigafactory for battery production.

Volvo Cars announced the two had now signed a binding agreement for the business venture. The new R&D center will be located in the Swedish city of Gothenburg. The R&D center will begin operations in 2022, will create a few hundred jobs in Gothenburg, and position Volvo Cars as one of the few automotive businesses to make battery cell development and production part of its end-to-end engineering capabilities.

The new R&D center in Gothenburg will be followed by the construction of a new battery manufacturing plant in Europe. The plant will produce next-generation technologically state-of-the-art battery cells, developed explicitly for the next generation pure electric Volvo and Polestar cars. The plant's exact location is expected to be confirmed early next year.

The business partnership will develop tailor-made batteries and battery technology that give Volvo drivers what they want, such as quick charging times and range. Volvo said that the business partnership offers deep vertical integration as the battery represents the most significant individual cost components in an electric vehicle and a substantial part of the carbon footprint.