CHENGDU - FDG Electric Vehicles Ltd Tuesday started construction on a new energy vehicle (NEV) and lithium battery plant in Southwest China's Sichuan province.

With an investment of 16 billion yuan ($2.5 billion), the plant in the city of Jianyang has a designed annual capacity of 400,000 vehicles and 4 gigawatt-hour of batteries, the company said.

The plant will be built in two phases, it said.

Covering an area of 87 hectares, the first phase of the project involves an investment of 4 billion yuan. It has an annual capacity of 100,000 NEVs and 1 gigawatt-hour of batteries.

Miao Zhenguo, vice-chairman of FDG, said the first phase of the facility is expected to begin operation in 2019 and generate sales revenue of 20 billion yuan a year.

Due to government subsidies, the domestic NEV industry has witnessed rapid growth in recent years, with 777,000 NEVs sold on the Chinese market last year, up 53.3 percent. The total production and sales of NEVs is expected to hit 5 million units by 2020.