Chinese battery maker Contemporary Amperex Technology Ltd (CATL) will build its first production site in the eastern German state of Thuringia, agreeing to a major contract with BMW to supply lithium-ion batteries. A contract to build the new plant was signed on Monday.

Around 240 million euros ($280 million) will be invested in the first phase of the project, Wolfgang Tiefensee, Thuringia's minister of economic affairs, told the press.

BMW plans to source 4 billion euros of battery cells from CATL over the next few years, with 1.5 billion euros coming from the new site in Erfurt, capital of Thuringia, said Markus Duesmann, the carmaker's purchasing head.

CATL said the new factory was just its first step in Europe.