Germany has granted this Swedish company a $525 million loan guarantee to build a battery cell plant.

Northvolt AB Germany Sweden electric

Northvolt AB, the Swedish battery cell maker, got a $525 million loan guarantee from Germany for a pilot plant, marking its support for the technology across Europe.

Northvolt, set up by two former Tesla Inc. executives, has assembled more than $3 billion in debt and equity to finance production in its native Sweden, targeting battery-cell output equal to about 40 gigawatt-hours of capacity.

The guarantee is a stepping stone to the battery cell maker’s plan to operate with Volkswagen AG a “Northvolt Two” plant in Salzgitter, Germany, from 2024, the country’s Economy and Energy Ministry said in an email Monday. Volkswagen and BMW AG are participating in the Swedish project.

Northvolt’s plans show confidence in the potential of Europe’s electric car market. The market for the cells, the basic components of electric vehicle battery packs, may grow to at least 250 billion euros ($296 billion) by 2025, according to European Commission estimates.

Western Europe’s electric vehicle sales pulled ahead of China’s last month, helped by subsidies in Germany and France that have been raised during the coronavirus crisis.