Volkswagen has estimated that it could receive €10 billion in US incentives. Therefore, the automaker postponed the construction of a battery plant that was supposed to be located in eastern Europe. Instead, it prioritizes the construction of a similar facility in North America.
Their decision is the most recent massive impact caused by Joe Biden’s $369 billion package of subsidies and tax incentives for green technology. It funnels European companies to the United States.
People who were present at the meeting stated that Europe’s largest automobile manufacturer reported to EU officials the previous week that it anticipated reaping €9 billion to €10 billion in subsidies and loans from the US president’s Inflation Reduction Act and other US schemes over the lifetime of the factory.
Net Zero Industry Act of the European Commission
According to one person with firsthand knowledge of VW’s decision-making, VW was “waiting” for the outcome of how the EU reacted to Washington’s incentives before moving forward with plans to construct a plant in eastern Europe.
“Plans in North America have moved forward faster than expected and overtaken decision-making in Europe.”
Unnamed source
As part of its response to the US green scheme, the European Commission will publish a Net Zero Industry Act the following week.
The European Commission aims to loosen state aid regulations and reevaluates whether to deploy subsidies at the EU level.
However, industry executives argued that a preliminary draft outlined the week before needed to be revised.
At a meeting last week in Brussels attended by the competition commissioner Margrethe Vestager, a senior executive from another European battery manufacturer, said, “It looks pretty bad. Concrete measures were absent.”
Volkswagen’s dedication to building more cell factories
Another executive shared his thoughts about opting for the US than its home market.
“We’ve been contacted by many US states, and they all highlight the IRA. When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe.”
VW executive
Financial Times reports that on Wednesday, the European Commission said it would not provide commentary on companies’ independent decisions.
VW stated that decisions still needed to be made regarding the locations of its plants in North America or Europe. It further asserted that the company was dedicated to constructing more European cell factories.
“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.”
Volkswagen
The battery manufacturer Northvolt, also present at the meeting, reportedly suggested that it might select the United States over Germany when choosing the location for its future gigafactory. That is except if Brussels gave more concrete backing, according to familiar people with the discussions.
They stated that Northvolt predicted it would be eligible for more than €8 billion in US subsidies for just one factory.
Faster progress on building the battery factory
After participating in the meeting in Brussels, the head of VW’s components unit, Thomas Schmall, wrote on LinkedIn. It indicated that the automaker is making “much faster progress” in North America with plans for a battery factory compared to Europe.
He said that Europe was in danger of missing out on “billions of investments that will be decided in the coming months and years.” He advocated for a public state aid program in Europe and lower prices for green energy.
A lobbying group, Transport & Environment, recently warned that more than two-thirds of European battery initiatives were in danger of being scrapped, delayed, or scaled back.
VW asserted that it would establish six gigafactories approximately two years ago. The automaker has gone further than most other automobile manufacturers to secure volatile supply chains by announcing plans to assemble batteries and produce cells.
Last week, VW’s chief financial officer, Arno Antlitz, stated that the automobile manufacturer “would have done [a North American battery plant] anyway.” However, the new subsidies accelerated the company’s plans.
“The IRA gives us a tailwind in terms of speed and consequence, so we have the possibility to enlarge our global footprint even faster in the US with the IRA.”
VW’s chief financial officer, Arno Antlitz
See Also:
- Volkswagen and PowerCo SE launch site search for first gigafactory in North America
- Volkswagen surveying sites to construct a factory in USA for its Scout EVs
- The ID. Tiguan, Volkswagen’s best-selling SUV, will be electric
- Volkswagen develops a new EV production and software strategy
- Wolfspeed, ZF partner to build a new German EV chip factory and R&D center worth $3bln
