Mercedes-Benz AG opened its first US electric vehicle (EV) battery factory and said Japanese battery manufacturer Envision would provide AESC battery modules for US-made Mercedes EVs.

Mercedes-Benz AG opened its first US electric vehicle (EV) battery plant on Tuesday and said Japanese battery manufacturer Envision AESC would supply battery modules for US-made Mercedes EVs from a new facility in the US by the middle of the decade.

In addition to launching its battery plant in Bibb County, Alabama, Mercedes also previewed a large electric SUV that will be built this year at the nearby Tuscaloosa, Alabama assembly plant. The EQS SUV and a smaller EQE electric SUV, which will also be made in Alabama, join a growing line of electric SUVs that Tesla is looking to challenge in the United States, China and Europe.

The battery plant, which will employ 600 workers, and the assembly facility are part of a 40 billion euro ($44 billion) effort by Mercedes to go all-electric by 2030, where markets allow. Mercedes, which plans to produce EV batteries in Europe, North America and Asia, aims to have eight cell plants with partners around the world with the capacity to produce 200 gigawatt hours per year by the end of the decade.

Mercedes CEO Ola Kaellenius and other executives were in Alabama on Tuesday to open the new battery factory. Kaellenius is trying to accelerate Mercedes’ shift from a combustion technology company to one whose products do not emit carbon and rely on software and computing power.

Rising gasoline prices since Russia’s invasion of Ukraine have compounded challenges for established automakers who still rely on fossil fuel vehicles for their profits. Mercedes and other established automakers are following Tesla in EV sales and developing computer and software systems to compete with the US company’s flood of new features and updates.

The Mercedes Alabama assembly plant, which turns 25 this year, can build both electric and combustion vehicles and is one of the largest vehicle factories in the world.

($1 = 0.9101 euros)

(Reporting by Joe White; editing by Edmund Blair)

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