BERLIN The auto battery parts joint venture between Volkswagen's PowerCo and Belgian materials firm Umicore has chosen Poland as the site for its first factory, PowerCo said on Saturday.

Through the $2.9 billion joint venture, dubbed Ionway, first flagged in December 2021, the companies are joining a number of European automakers that have brought battery supplies closer to home in the shift towards electric vehicles.

The Polish government is providing 350 million euros ($371 million) in cash grants for the investment in the southwestern town of Nysa that would create around 900 jobs, it said.

Ionway wants to build up its annual production capacity by the end of the decade to around 160 gigawatt hours (GWh) per year - enough for 2.2 million electric vehicles.

PowerCo - whose Poland initiative comes after VW in April set out plans to invest up to C$7 billion to build a car battery plant in Ontario, Canada - said it had decided on Poland because the location was strategically favorable, plus there was sufficient skilled labour and renewable energy sources for production.

Construction work will begin as soon as the permitting process is completed, it said.

Ionway is intended to supply PowerCo's European battery cell factories with key battery materials and to cover a large portion of PowerCo's needs in the European Union. In return, Umicore receives secured access to an important part of Europe's demand for cathode materials for electric vehicles.

($1 = 0.9446 euros)

(Reporting by Sabine Wollrab and Sarah Marsh; Editing by David Holmes)