Inside sources at VW told DPA that the new site could be built at Salzgitter, Lower Saxony – just 50 kilometres from company HQ in Wolfsburg and already the home of an engine factory.
Business daily Handelsblatt had previously reported that the carmaker wants to remain independent of Asian battery builders by keeping the critical components under its own roof.
But a spokesman for the company refused to confirm the anonymous reports.
“We've brought electro-mobility into the centre of the firm and built up wide-ranging skills,” he said, adding that VW aimed to be the market leader in electric cars by 2018.
Tesla leads the charge
Batteries are the key technology to building commercially successful electric cars, as they're the most expensive component and the limiting factor in a vehicle's range.
“In my opinion we need to build batteries in Germany. That's the core technology of electric transport,” VW brand chief Herbert Diess said in November 2015.
German manufacturers are eager to avoid dependence on Asian manufacturers or being overtaken by car industry newcomer Tesla, founded by Silicon Valley billionaire Elon Musk.
And workers' representatives want to make sure that jobs aren't lost here as electric cars become a larger share of manufacturers' output.
Tesla is currently building the world's largest battery factory in the USA in collaboration with Panasonic.
Industry observers saw signs that the German federal government shares the auto industry's concerns about Tesla when state aid for e-car buyers was limited to vehicles costing less than €60,000 – considerably less than the price of one of Musk's motors.
Making a bigger commitment to electric cars is also good publicity for Volkswagen after months of scandal over emissions cheating.
The company has had to set aside billions of Euros in anticipation of fines and compensation payouts after building so-called “defeat devices” - which change an engine's emissions profile to look less polluting under test conditions - into millions of vehicles sold around the world.