The biggest automaker in Europe is “waiting” on an EU response to the Biden administration’s subsidies.
After calculating that it could receive up to US$10 billion in incentives, Volkswagen decided to postpone a planned battery plant in eastern Europe and prioritize a facility of a similar nature in North America. The decision is the most recent repercussion of Joe Biden’s $369 billion package of green technology subsidies and tax incentives that are luring European companies to the US.
The largest automaker in Europe reportedly told EU officials last week that it anticipated receiving between $9 billion and $10 billion in loans and subsidies from the US president’s Inflation Reduction Act and other US programs over the course of the factory.
VW was “waiting” to see how the According to a source with direct knowledge of VW’s decision-making, the EU would respond to Washington’s incentives before moving forward with a plan to build a plant in eastern Europe. “Plans in North America have moved forward faster than expected and overtaken decision-making in Europe,” the person said.
The IRA has caused policymakers in Europe to panic as high-tech industries like batteries, which they have spent years fostering, look across the Atlantic as competition from China increases. The European Commission, which will next week publish a Net Zero Industry Act as part of its response to the US green scheme, is looking to loosen rules on state aid and is reassessing whether to deploy EU-level subsidies.
However, industry executives say that a preliminary version that was outlined last week was inadequate. A senior executive at another European battery maker present at last week’s meeting, which took place in Brussels and that competition commissioner Margrethe Vestager attended, said: “There were no specific actions taken, and it looks pretty bad.”
Another executive said: “Many US states have gotten in touch with us, and they all mention the IRA. When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe.” On Wednesday, the European Commission stated that it did not comment on specific business decisions.
VW said no decisions had been made on the locations of its plants in North America or Europe and it was committed to its plan to build more cell factories in Europe. “But for this we need the right framework conditions. That is why we wait and see what the so-called EU Green Deal will bring,” the company said.
According to people with knowledge of the discussions, Northvolt, a battery manufacturer that was present at the meeting, suggested that unless Brussels provided more specific support, it might prefer the US over Germany as the location for its next gigafactory.
According to Northvolt, it could receive US subsidies worth more than $8 billion for just one factory. Please make use of the sharing options available via the share button at the top or side of articles. Northvolt declined to comment.
VW is making “much faster progress” with battery factory plans in Thomas Schmall, the head of VW’s components division, commented on LinkedIn after the meeting in Brussels that North America is superior to Europe. Europe was at risk of losing out on “billions of investments that will be decided in the coming months and years”, he added, calling for a Programs for public state aid in Europe and cheaper green energy.
More than two-thirds of European battery projects, according to lobbying organization Transport & Environment, risk being canceled, delayed, or scaled back. Two years ago, VW announced plans to construct six gigafactories, going beyond most other automakers in securing increasingly unstable supply chains by announcing plans to not only assemble batteries but also manufacture cells.
Arno Antlitz, VW’s chief financial officer, last week said the carmaker “would have done [a North American battery plant] anyway”, but that the new subsidies accelerated its plans. “We have the potential to increase our global footprint even more quickly in the US with the IRA because it provides us with a tailwind in terms of speed and impact.”