SALZGITTER, Dec ‌17 (Reuters) - Volkswagen's PowerCo is looking more closely at external financing options as its stricken ‍German parent ‌reins in investment, the CEO of the battery business said.

Volkswagen reported a 1.3 billion euro ($1.5 ⁠billion) loss in the third quarter and ‌its CEO Oliver Blume recently announced a tighter investment budget as it faces intense competition in China, U.S. tariffs and a costly shift to electric vehicles.

CEO Frank Blome said PowerCo is adequately funded but is examining ⁠external financing "more intensively than before".

"We know that if the corporation (Volkswagen) generates less money, we have to operate with less money," ​Blome told reporters ahead of launch on Wednesday of early-stage ‌European battery production at PowerCo's flagship factory in ⁠Salzgitter, Germany.

"That's how it is, or we have to tap into other sources."

MILESTONE FOR IN-HOUSE BATTERY PRODUCTION

Founded in 2022, PowerCo is an attempt by Europe's top carmaker to produce its ​own batteries for Volkswagen electric vehicles and catch up with BYD and Tesla.

The European Commission unveiled a plan on Tuesday to drop the EU's effective ban on new combustion engine cars from 2035 after intense pressure from the auto sector, marking the bloc's biggest retreat from ​its green ‍policies in recent years.

Volkswagen has ​repeatedly cut PowerCo's budget, from an initial 15 billion euros over five years to less than 10 billion currently, the group's finance chief recently told investors.

Blome said PowerCo has already sounded out investors for potential interest, without giving further details.

Volkswagen has previously indicated the possibility of floating PowerCo, alongside the option of bringing in an outside investor or entering strategic partnerships, although a listing is ⁠not expected before its factories are up and running.

An IPO would work in principle, but is ultimately a decision for Volkswagen, Blome said.

Two ​further PowerCo sites, in Spain's Valencia and St Thomas in Canada, are under construction, with a total capacity of up to 200 gigawatts planned in the coming years.

PowerCo had originally planned to build six battery factories in Europe alone by 2030, with ‌240 gigawatt hours of capacity, but its ambitions were dialled back in response to the slower-than-expected uptake of electric cars in the region.

($1 = 0.8499 euros)

(Reporting by Rachel More; Editing by Alexander Smith)