CEO Peter Carlsson and chief operating officer Paolo Cerruti are the two people behind Northvolt, a Swedish-based startup that wants to use the country’s green energy credentials, vibrant venture capital scene, and its access to key raw materials to create what would be the single biggest plant for lithium-ion batteries in Europe.

Northvolt aims to build a factory capable of making 32 gigawatt-hours of battery packs a year by 2023, at a cost of just over 4 billion euros (for context, Tesla has set the initial capacity for the Gigafactory at 50 GWh, with the aim of expanding it ultimately to 150 GWh).

Europe has lagged Asia and the U.S. in the battery field so far. But Volkswagen’s diesel emissions scandal has forced a major strategic shift on the region’s carmakers. VW, which controls a quarter of the European market, now wants a quarter of its new cars sold to be electric by 2025. Strict new fuel-efficiency regulations from the EU will put pressure on others to at least keep pace with that migration beyond combustion engines.

With Europe making over 18 million vehicles a year (20% of the global market), any big increase in EV penetration will create a big incentive for large-scale battery production close to home. Tesla’s gigafactory is, after all, only expecting to supply the company’s own needs, and battery makers in Korea and Japan, like Samsung, LG and Panasonic, have the faster-growing Chinese market on their doorstep to satisfy.

“This is to do with security of supply and flexibility in the supply chain,” says Erik Brandsma, the director-general of the Swedish Energy Agency, a government institution that has backed Northvolt with a total of 4 million euros so far.

Northvolt’s two leaders are both supply chain veterans: Carlsson oversaw Tesla’s while it was bringing the pioneering Model S to market. Before that, he was a supply chain expert at Philips spin-off NXP Semiconductors and telecoms company Ericsson. Cerruti joined up with Carlsson at Tesla after stints at Nissan and Renault.

Quite how they intend to raise $4.25 billion to build the factory while keeping a meaningful stake in their venture isn’t clear. Tesla, of course, already had a capitalisation in the billions by the time it started to raise money for the Gigafactory, and a public listing that made it easier to price any additional needs for capital. In an interview with the Financial Times, Carlsson admitted that funding would be “the most challenging” issue.

But he’s not without options: the Scandinavian venture capital ecosystem is one of the best in the region, and Europe’s energy sector and the automakers are more than happy to accelerate the adoption of new-generation technology (since their long-term survival may well depend on it). Sweden’s biggest utility, Vattenfall, is already one of Northvolt’s backers. Other examples of the trend include such innovations as the “vehicles-to-grid” battery technology developed by Italian energy company Enel, Californian startup Nuvve and others. That project aims to let owners use their car batteries to take energy out of the grid when it’s cheap and sell it back to the grid at peak times, or even (ultimately) balance the system during blackouts.

Carmakers are in on the act too. Daimler, the maker of Mercedes-Benz, followed BMW Group last week in investing in U.S. startup ChargePoint, as it expands its vehicle charging infrastructure across Europe.

Northvolt wants to take a decision on the plant’s site by the middle of the year. While it’s not yet clear where it will be, Sweden seems the likeliest location, owing to an abundance of cheap electricity from its nuclear, hydro and renewable plants – all part of the mission of making Europe carbon-neutral.