By Supantha Mukherjee and Victoria Waldersee

STOCKHOLM/BERLIN Sweden's Northvolt said on Friday it will invest several billion euros to build an electric vehicle battery plant in Germany, in a win for Europe after speculation that the company could divert planned investment to the United States.

Northvolt could invest around 3-5 billion euros ($8.81 billion) in the plant and receive around half a billion euros in German subsidies, according to two sources familiar with the matter.

Spokespeople for Northvolt and the German government said the precise investment and funding amounts were not finalised and were subject to approval from the European Commission.

The Swedish battery maker, alongside Volkswagen, is the furthest ahead among just a handful of European players paving the way for a home-grown battery industry, with a large chunk of planned capacity in Europe to be owned by Asian players.

Taiwanese battery maker ProLogium announced on Friday it had picked France for its first overseas car battery plant.

The subsidies for Northvolt's battery plant, if approved, would be the first granted by Germany under the European Union's Temporary Crisis and Transition Framework, developed to support green industrial projects as Europe scrambled to provide a competitive offer to U.S. subsidies provided by the Inflation Reduction Act.

"The EU-Commission opened up a clear path towards securing important industrial investments in Europe," German Economy Minister Robert Habeck said in a statement.

The plant, due to begin delivery in 2026, will ramp up to 60 gigawatt hours of capacity - enough to supply around 1 million electric vehicles with battery cells every year - more than each of Volkswagen's planned plants in Germany and Spain but below CATL's mega-investment in Hungary of an 100 gigawatt-hour plant.

Northvolt's investment will create 3,000 direct jobs in Heide and thousands more in the surrounding industry and service sector. Local councils this week approved the draft development plan for the plant, clearing a major administrative hurdle.

EUROPE'S BATTERY LANDSCAPE

Northvolt and the state of Schleswig-Holstein signed a memorandum of understanding in March 2022 to develop a battery plant in the region but the company later said it may prioritise expansion in the U.S. ahead of Europe in light of more favourable subsidies and lower energy costs.

A second plant could also be constructed in parallel elsewhere, a spokesperson said, indicating the decision to build in Germany did not exclude the possibility of a further plant in North America.

While Europe has been able to attract big investments for the chip industry from the likes of Intel with lure of subsidies, the U.S. has offered major tax subsidies to cut carbon emissions and boost domestic manufacturing.

($1 = 0.9084 euros)

(Reporting by Victoria Waldersee, Supantha Mukherjee, Andreas Rinke; Editing by Friederike Heine, Mark Potter and Sharon Singleton)