A view shows the logo of Stellantis at the entrance of the company's factory in Hordain, France, July 7, 2021.
A view shows the logo of Stellantis at the entrance of the company's factory in Hordain, France, July 7, 2021. Reuters / Pascal Rossignol

Stellantis NV and Samsung SDI said on Tuesday they will invest more than $2.5 billion to build a new joint venture battery plant in Kokomo, Indiana, as the Chrysler-parent ramps up electric vehicle production plans.

Targeted to start in 2025, the plant aims to have an initial annual production capacity of 23 gigawatt hours (GWh), with an aim to increase to 33 GWh in the next few years.

The joint venture will create 1,400 new jobs and the investment could gradually increase to up to $3.1 billion.

Indiana said the project is eligible for at least $186.5 million in incentives plus additional unspecified ones. Kokomo, Howard County, Duke Energy Indiana and the Northern Indiana Public Service Company have also offered additional incentives.

Stellantis is boosting production of plug-in hybrids but has lagged some competitors in launching battery electric vehicles (BEVs) in the United States.

Stellantis Chief Executive Officer Carlos Tavares said during a videoconference he expects a shortage of EV batteries will hit the auto industry in 2024-2025 as manufacturers try to ramp up electric vehicle sales while still building new battery factories.

But as new battery factories - including five planned by Stellantis in Europe and North America - start to accelerate production, Tavares said he expects a shortage of battery raw materials, which he thinks will threaten automakers plans in 2027-2028.

The new Stellantis battery plant in Kokomo will be located near its three existing combustion engine and transmission factories.

Tavares said when and how the company could repurpose existing factories to build electric vehicle components instead of combustion engine parts will be "based on the regulation of emissions."

He also cautioned that it will not be easy to move workers from combustion engine or transmission factories to EV hardware production. "It's a different planet," he said.

Last year, Stellantis said it planned to pump $35 billion into electric vehicle production and software globally through 2025.

Samsung SDI on Wednesday said in a regulatory filing it plans to invest $1.3 billion through August 2025 on the joint venture battery plant with Stellantis. That amount could be expanded to $1.6 billion in discussions between the two companies in the future, it said.

Samsung SDI will be using its technology PRiMX to produce battery cells and modules for North America.

In March, Stellantis and LG Energy Solution said they would invest $4.1 billion for a joint venture battery plant in Canada with an annual production capacity in excess of 45 gigawatt hours.

United Auto Workers Vice President Cindy Estrada said the union looks "forward to negotiating an agreement with Stellantis that brings this new plant under our master agreement with traditional wages and benefits."

President Joe Biden at a visit to Samsung in South Korea on Friday urged the companies to "enter into partnerships" with "American union members" and said JVs "that manufacture electric vehicle batteries would be made stronger by collective bargaining relationships with America unions."

($1 = 1,260.4200 won)