Lithium-ion battery maker Northvolt has raised a mammoth $2.75bn in fresh equity to expand capacity at its factory in northern Sweden as battery makers across the world rush to keep up with the growing demand for electric cars.

The company said on Wednesday that the private placement deal was led by Swedish pension funds AP1-4 and OMERS Capital Markets, alongside existing investors Goldman Sachs and Volkswagen. It brings the total capital in equity and debt raised by Northvolt to $6.5bn.

Northvolt has already won over $27bn worth of contracts from customers such as BMW, Scania and Volkswagen which are making the push to electric. The company expects to build at least two more factories in Europe over the coming decade with the next one likely to be in Germany.

Peter Carlsson, cofounder and CEO of Northvolt, who previously worked for Tesla, said: “We have a solid base of world-class investors and customers onboard who share Northvolt’s mission of building the world’s greenest battery to enable the European transition to renewable energy.”

European policymakers have also been keen to support Northvolt to ensure that Europe has a native supply of batteries and top-class battery technology so it does not have to rely on the US or Asia.

Diego Pavia, CEO of EIT InnoEnergy, an independent body of the European Union set up in 2008 to deliver innovation across Europe, said: “Northvolt is a tremendously successful initiative. It represents a cornerstone in Europe’s ambition to create an annual €250bn battery value chain by 2025…It is also a leading example of how Europe can create new industrial value chains, which are at the core of growth, job creation and competitiveness.”

He added that the European Commission had in 2017 set up a European Battery Alliance which was bringing together more than 600 industrial, financial and innovation actors with the objective to build a “strong, sustainable and competitive European industrial battery value chain, from mining to recycling.”

He said that European initiatives were proving successful and partly as a result the number of electric vehicles sold in Europe in 2020 (1.4m) was triple that of the US, and the investments captured (€60bn) was almost three times that of China.

Alexander Hartman, CFO of Northvolt said: “This is a new European industry in the making and it will require significant investments over the coming decade. It is encouraging to see that the investor community has identified the opportunity early, and we hope to see more investments throughout the value chain over the coming years.”