Two Gigafactories, Two Bets: Spain’s Battery Manufacturing Test

Whether Europe can manufacture battery cells competitively is the single most important open question in its automotive industry, and Spain is where two very different answers are being tested simultaneously. One manufacturer is building the capability itself; the other is partnering with the company that already dominates globally. This analysis compares them. It is part of the Spain Company Stories hub.

Why are the two strategies so different?

Because manufacturers disagree about whether cell production is a core competence. Volkswagen concluded that cells are strategically critical and built PowerCo to make them in-house, on the argument that a manufacturer dependent on Asian suppliers for its most expensive component has no control over its own cost structure.

Stellantis concluded the opposite: that cell manufacturing is a specialised industrial process best done by companies that already do it at scale, and that partnering with the global leader delivers better cells sooner at lower risk than building the capability from nothing.

The evidence so far mildly favours the partnership approach. European attempts to build indigenous cell manufacturing have encountered severe ramp-up difficulties, while joint ventures with established Asian producers have generally proceeded more smoothly, because the partner brings process knowledge that cannot be hired quickly.

Why did both choose Spain?

Electricity, land, proximity to assembly and public support. Cell manufacturing is extremely energy-intensive, and Spain offers among the most competitive industrial electricity in Western Europe with a high renewable share — which matters both for cost and for the carbon footprint requirements applying to batteries sold in Europe.

Proximity to vehicle assembly is decisive. Battery packs are heavy and expensive to transport, so cell plants locate near the factories they supply, and Spain assembles more vehicles than any European country except Germany.

Public support closed the gap. Spain’s strategic programme for electric and connected vehicles allocated substantial grants, and while the amounts named — €167m and €114m — are small relative to project cost, they were part of packages including land, infrastructure and training support.

What are the ramp-up risks?

Substantial and demonstrated. Cell manufacturing requires extremely tight process control, cleanroom conditions, dry rooms and yields that only improve with experience, and new plants routinely take far longer than planned to reach acceptable output quality.

Sagunto’s timeline has already moved, with pilot production shifting from mid-2026 to around late 2026 and deliveries scheduled for July 2027, initially at 20 GWh from two production blocks. PowerCo has framed multi-sourcing as intentional from the start.

That framing is sensible risk management and it also acknowledges reality: vehicle programmes launching in 2026 cannot depend on cells from a plant delivering in 2027, so the initial vehicles use cells sourced elsewhere within the group or purchased externally.

What does this mean for Spanish industry?

A genuine new industrial sector with a supply chain attached. Cell manufacturing requires cathode and anode materials, separators, electrolytes, equipment maintenance and specialised logistics, and plants of this scale attract suppliers to locate nearby.

It also creates skilled employment of a type Spain has limited experience with. Process operators for cell manufacturing require training that did not previously exist in the country, which is why the Valencian regional government invested in a dedicated training centre next to the Sagunto site.

The strategic gain is defensive as much as offensive. A country hosting cell production is considerably harder to remove from the European automotive map than one that only assembles vehicles, because the cell plants anchor the assembly rather than the reverse.

What could go wrong?

Demand, chemistry and competition. European electric vehicle adoption has grown more slowly than the capacity plans assumed, and cell factories running below utilisation lose money severely given their fixed cost structure.

Battery chemistry is also moving. Plants designed around one cell format and chemistry may need substantial retooling if the market shifts, and lithium iron phosphate has gained share against nickel-based chemistries faster than European planning assumed.

Competition is the third. Chinese cell manufacturers have scale, cost and process maturity that European entrants do not, and they are building plants inside Europe. A European cell plant must compete against them on cost while carrying the disadvantage of being newer at the process.

Why does electricity matter so much for cells?

Because cell manufacturing consumes enormous amounts of it and because European rules increasingly price the carbon content of batteries. A gigafactory is one of the largest single industrial electricity consumers a region will host.

Spain’s advantage is both cost and carbon. High renewable penetration means cells manufactured there carry a lower carbon footprint than those made on a coal-heavy grid, which matters directly under European battery regulation and to manufacturers reporting vehicle lifecycle emissions.

The constraint is grid connection rather than generation. Spain generates abundant cheap renewable power and connecting a very large new load requires transmission capacity, which is the same bottleneck described in the analysis of Spanish electricity markets elsewhere in this hub.

How does this compare with the rest of Europe?

Spain is among the more successful European locations, which says as much about the difficulties elsewhere as about Spain. Several high-profile European cell projects have been cancelled, delayed severely or entered insolvency.

The pattern among the failures is consistent: independent ventures without a committed manufacturer buyer, attempting to build process capability from nothing, and running out of capital during ramp-up. Both Spanish projects avoid that structure.

The lesson European policymakers have drawn is that cell manufacturing requires either a manufacturer with guaranteed offtake or a partner with existing process mastery. Spain happens to host one example of each, which makes it an unusually informative test case.

What happens to the cells?

They go into vehicles built on the Iberian peninsula. Sagunto’s output is intended for Volkswagen’s Spanish and Portuguese plants producing the group’s small electric models, including the family being built at Martorell and eventually the smallest model in the range.

That integration is the point. Cells produced two hours from the assembly plant that consumes them avoid the transport cost, carbon footprint and supply risk of shipping heavy battery components across continents.

It also links the two Iberian automotive industries. Volkswagen’s Portuguese plant, examined in the neighbouring hub, builds from the same programme, which means Spanish cell production supports Portuguese assembly and both depend on the same demand forecast.

What is the recycling angle?

A future business with a present regulatory driver. European rules increasingly require recycled content in new batteries, which guarantees demand for recovered material once end-of-life volumes arrive.

Manufacturing scrap provides the near-term feedstock. A gigafactory ramping up generates substantial reject material, and recycling capacity located alongside cell production has a supply source before consumer batteries reach end of life.

For Spain this is a logical extension. A country hosting cell manufacturing, with existing chemical and metals processing capability, is well positioned to add recycling — and it does so without any of the permitting difficulty attached to primary mining.

What skills does cell manufacturing need?

Process operators, maintenance technicians, quality engineers and materials specialists, in a discipline closer to pharmaceutical or semiconductor manufacturing than to automotive assembly.

Spain has almost none of that workforce, which is why the Valencian government committed to a dedicated training centre next to the Sagunto site, with an investment of around €15m on a 20,000 square metre plot focused on preparing young people for the plant.

That is the correct policy response and it is slow. Training a cell process technician takes months to years depending on the role, and the first cohorts must be trained before the plant reaches full output rather than after.

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