Volkswagen Plays Waiting Game over European Battery Production

Volkswagen is halting its expansion of automotive battery production plants in Europe awaiting a conclusion of European Union negotiations over the US’s Inflation Reduction Act.

The act, which gives BEV subsidies only to automakers sourcing the bulk of their components from American production sites, poses a threat to European manufacturers seeking to tap into the lucrative US automotive market. Now Volkswagen has confirmed it is pausing plans for more battery plants in Europe until negotiations have been concluded, Reuters reports.

The Financial Times previously reported that Volkswagen was pausing plans for a battery plant in eastern Europe and was prioritizing building a plant in North America where it could reap $10.54Bn in subsidies. Asked about the report, a Volkswagen spokesperson said the carmaker was “still evaluating suitable locations for our next cell factories in Eastern Europe and North America. No decisions have been made yet”.

Under former chief executive Herbert Diess, Volkswagen said in March 2021 it would build six gigafactories in Europe with total capacity of 240 gigawatt hours. “We stick to our plan to build cell factories for about 240 GWh in Europe by 2030 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’s statement said.

The first of the six plants is a Northvolt plant in Sweden, in which Volkswagen holds a 20% stake. A second in Germany will be built by 2025 with China’s Gotion High-Tech (002074.SZ), in which Volkswagen owns 26%. Last March the carmaker picked a site near Valencia, Spain for a third plant. Volkswagen board member Thomas Schmall posted on LinkedIn last week that Europe risked losing “the race for billions of investments that will be decided in coming months and years” to the attractive conditions offered by the IRA.

— Paul Myles is a seasoned automotive journalist based in Europe. Follow him on Twitter @Paulmyles_

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