Set for a site in Schwarzheide, 100 kilometres (62 miles) from the planned Tesla plant, BASF's factory “will produce cathode active materials with an initial capacity enabling the supply of around 400,000 full electric vehicles per year,” the company said in a statement.
It did not immediately say how many jobs would be created.
The Brandenburg unit will work in tandem with a plant in Finland producing precursors for the cathodes, the part of a battery cell that passes current to the rest of the electrical circuit.
Both are scheduled to come online in 2022.
The project “is part of our first joint European project on battery cell production,” German Economy Minister Peter Altmaier said in a statement.
Several European Union member states, led by Germany and France, have offered billions in subsidies to build up an “Airbus of batteries”, seeing the globally competitive pan-European aircraft builder as a model for future industries.
Batteries make up around 40 percent of the value of an electric car, but are currently made by companies in South Korea, China and Japan.
Although Europe's industrial giants fear for their business models built in the combustion engine age, none was prepared to take the plunge into cell-making without government help.
Across Germany in Kaiserslautern, France's Peugeot now plans a two-billion-euro ($2.2 billion) battery cell production site that will supply batteries for up to 500,000 vehicles a year by 2024.