Ford Motor says it plans to build a battery plant in the United States to boost its production capacity of electric vehicles.

The US auto giant said on Monday it is investing 3.5 billion dollars to construct the factory in Michigan, where its headquarters is located. It said production is slated to start in 2026.

At the plant, the company will produce a type of lithium ion battery that does not need nickel or cobalt, prices of which have been rising. The company has signed an agreement with China's Contemporary Amperex Technology, or CATL, to use its knowhow in making the batteries.

This comes as the administration of President Joe Biden steps up support for domestic production of EVs and batteries amid competition from China. Washington last year introduced a law offering large tax incentives to buyers of electric vehicles.

Ford says the government support allows it to produce batteries domestically at lower costs.

General Motors and other companies also plan major investments in US battery production.