By Emma Pinedo

SAGUNTO, Spain (Reuters) -German carmaker Volkswagen AG and partners will invest 10 billion euros ($10.6 billion) to make electric vehicles and batteries in Spain, its chief executive said on Thursday, 3 billion euros more than it had previously committed.

The company also announced a partnership deal with Spain’s largest power utility Iberdrola, which will set up a solar park to partly power the battery plant to be built in the municipality of Sagunto near Valencia.

Iberdrola will invest 500 million euros in the electrification plan, its Chief Executive Officer Ignacio Sanchez Galan told reporters, without giving further details.

Volkswagen said in March it would invest 7 billion euros to build a battery plant and produce electric vehicles at its two car factories in Spain, but CEO Herbert Diess said that figure had been raised to 10 billion with new partners on board.

“We will electrify the second-largest car producer in Europe (Spain) with a new giga-factory of batteries and the production of electric cars in two plants,” Diess told an event in Sagunto, adding the plan was to create “a full ecosystem of suppliers from lithium extraction to the assembly of batteries”.

Diess speaking on a visit with Spanish Prime Minister Pedro Sanchez to the site where the factory will be built.

The German carmaker aims to start building the 40-gigawatt-hour (GWh) plant in the first quarter of 2023, with serial production to start by 2026. By 2030, the site will employ more than 3,000 staff, Volkswagen said.

Spain, Europe’s largest carmaker after Germany, last month launched a bidding process for about 3 billion euros in loans and grants to promote electric vehicle (EV) production. Volkswagen and its Spanish unit SEAT have presented a bid.

Winners of the PERTE funds, as the programme that consists mostly of European Union pandemic relief funds is known, will be chosen this year.

The company will invest 3 billion euros in the plant in Sagunto, another 3 billion euros in four SEAT factories, including the Martorell plant near Barcelona, and 1 billion in Pamplona, it said.

($1 = 0.9463 euros)

(Reporting by Emma Pinedo; Additional reporting by Christoph Steitz; Editing by Bernadette Baum and Edmund Blair)