Following a statement on Thursday, German auto giant Volkswagen announced a partnership with Swedish battery maker Northvolt and other companies to develop batteries for future electric vehicles.

Starting early next year, the European Battery Union (EBU) aims to work together on accumulating knowledge on battery cell production, including research on raw materials, cell technology and the recycling of used batteries. This is in light of Germany’s investment of $1.14 billion towards companies looking to produce electric car cells. Additionally, the government also plans to fund a research facility to work on next-generation solid-state batteries. So far, more than 30 companies have applied for the program to support the production of battery cells, the Economy Minister said earlier this month.

The company is a part of the European Battery Union (EBU) that was granted an investment of $1.14 billion from Germany.

“We have a concentration of risk in the automobile sector. The industry is too dependent on the combustion engine,” Deputy Economy Minister Christian Hirte told Reuters. “The government, therefore, wants to help the sector in its efforts to diversify.”

“There are possibilities for example in the Lausitz region, maybe in cooperation with Poland,” said Hirte, who is the government’s coordinator for Eastern German affairs and for small- and medium-sized enterprises policy.

“One thing is clear: you cannot ignore East Germany if you are planning such mega projects. There is a lot of space and the acceptance among the population is great.”

Starting early next year, the European Battery Union (EBU) aims to work together on accumulating knowledge on battery cell production.

This move could be a shift from Germany’s traditional “hands off” approach to business decisions and is a part of European efforts to forge battery alliances to challenge the dominance of Chinese, Japanese and Korean firms.

Automotive industries in Germany play a vital role in its economic status, hence, ensuring primary contribution from local companies could be crucial. However, experts suggest that Germany’s entry into the scene would be expensively late considering that the Asian markets have already ramped up their production creating a risk of glut.