Volkswagen warns EU that US is beating it in race to attract battery makers

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08.03.2023 - 16:49

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theguardian.com:

Volkswagen has told the EU it is making faster progress in building a US battery factory than one in eastern Europe because of huge subsidies made available by the White House – adding to pressure on Brussels to offer bigger green incentives.

Europe’s largest carmaker has warned the EU it is being overtaken in the race to attract gigafactory investment, after Joe Biden announced a package of help to achieve net zero aims worth a total of $369bn (£312bn) under the Inflation Reduction Act (IRA).

Volkswagen is waiting for a response from Brussels before making a decision on whether to invest in the planned eastern European plant, the Financial Times reported.

The global supply of batteries for electric cars is dominated by Chinese, Korean and Japanese manufacturers but the US, Europe and other smaller players such as the UK are scrambling to catch up. Many analysts fear that without battery factories their existing car industries will eventually wither.

The EU has estimated that the market for batteries will be worth as much as €250bn (£223bn) a year by 2025, and several of its member states are offering large subsidies to attract investments by carmakers and battery companies.

However, the IRA subsidies put support from the EU or UK into the shade. Under the US act, battery cell manufacturers will be eligible for an “advanced manufacturing production credit” worth $35 per kilowatt hour of annual capacity. For factories producing at the scale of gigawatt hours in annual capacity, that support could run to billions of dollars a plant.

Volkswagen last week met senior EU officials as part of the European Battery Alliance, a body founded by the EU. The meeting was attended by the powerful EU commissioners, Maroš Šefčovič, Margrethe