The choice of location gives another boost to the economically weaker former communist east of the country after electric vehicle pioneer Tesla in November laid out plans for its first European factory and design centre near Berlin.
The site, in the town of Schwarzheide, some 120 km (75 miles) south of Berlin, will draw on feedstock from another BASF factory in Harjavalta, Finland, close to a nickel and cobalt refinery of raw materials partner Norilsk Nickel.
"With these investments in Finland and Germany, BASF will be the first CAM (cathode active materials) supplier with local production capacities in today’s three major markets – Asia, the U.S. and Europe," the company said in a statement.
The German government, which is eager to foster electric mobility jobs in Germany to offset an expected decline in combustion engine production, will give state support of more than 100 million euros to the BASF project, federal economy minister Peter Altmaier told Reuters.
The two factories will be able to produce enough cathode materials for 400,000 fully electric vehicles per year, it added.
BASF, which announced plans for the Harjavalta site in 2018, has previously put the combined investment for both projects at 400 million euros (£336.5 million).
A spokeswoman on Wednesday would not comment on the size of each project.
The European Commission on Dec. 9 approved 3.2 billion euros ($3.5 billion) of state aid from seven European Union countries for research and innovation in battery technology.
Germany's economy minister said at the time that companies that would benefit from this included BASF, BMW, Opel, Umicore and Varta.
Liberum analysts have estimated that cathode materials in a 50 KWh car battery will cost about $2,500, making it among the most costly parts of an electric vehicle.
BASF has said it expects the global market for cathode materials to be worth between 25 billion and 30 billion euros by 2025, boosted by demand for electric and hybrid vehicles.
BASF is competing with Europe's Umicore and Johnson Matthey as well as with a range of Chinese suppliers including Beijing Easpring and Ningbo Shanshan.
(Additional reporting by Thomas Seythal, Patricia Weiss and Christian Kraemer; Editing by Madeline Chambers, Elaine Hardcastle)
By Ludwig Burger
Stocks treated in this article : Peugeot
, LME Nickel Cash
, Varta AG
, Tesla Inc.
, BASF SE
, GMK Noril'skiy nikel' PAO
, Ningbo Shanshan Co.,Ltd.
, Beijing Easpring Material Techgy Co Ltd
, Johnson Matthey Plc
, BMW AG