The drumbeat of pressure on the European Union to provide a riposte to the vast US Inflation Reduction Act (IRA) subsidy package for green technology, including EVs and battery plants, is growing louder as the Volkswagen Group reportedly pauses plans for a new cell plant in eastern Europe.
The sheer size of the $369 billion (£309bn) incentive on offer to those that localise production of electric cars and batteries in the US has turned the head of many car makers, and left others worried that it’ll shrink an industry back home already under pressure from China’s dominance in the battery supply chain.
The production of a possible 1.8 terawatt hours battery capacity from 50 or so gigafactories in planning or under construction in Europe is “now at risk of being delayed, scaled down or cancelled” due to the lure of the US subsidies, Transport & Environment (T&E), a Brussels-based pressure group, wrote in a recent report. Plants at risk include Tesla’s planned gigafactory alongside its Berlin vehicle assembly plant, Northvolt’s plant in Heide, northern Germany, and Italvolt’s plant near Turin, Italy. We can now add to that VW’s planned eastern Europe plant, location still to be decided, according to a report from the Financial Times. The factory would be one of six VW plants alongside its battery partners in Europe.
“EU battery manufacturing is caught in the crossfire between America and China. Europe must act or risk losing it all,” Julia Poliscanova, senior director for vehicles and e-mobility at T&E, said.
The European Commission is fighting back with a new draft law, expected to be published on 14 March, that sets new targets for localising green technologies, including batteries, by increasing support and removing other barriers, according to a report from Euroactiv.
The Commission wants to localise the production of 85% of batteries used to power vehicles and other electric devices made in the EU by 2030. The draft law notes the IRA, China’s Five-Year Plan, Japan’s Green Transformation production and other schemes that are “dragging investments in relevant supply chains away from the European Union”. It noted that the subsidies “undermine a level playing field”.
What exactly will be announced in terms of monetary support isn’t yet known, but it’s clear that already solid support for industries such as battery making at a European and local level isn’t on the same scale as those available in the US. Ford has calculated the subsidies for battery making in the US at around $45 (£37.65) per kilowatt hour, a huge chunk given that the world’s cheapest EV battery right now – made by China’s CATL – is being produced at an estimated $134 per kWh (£112 per kWh).
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