EURACTIV — 2023-02-23
Automotive Industry
Amid growing concerns over a subsidy race between the US and Europe, Tesla has announced it will be backtracking on its investments in Germany due to higher subsidies in the US.
In 2019, Tesla said it would build one of its major production sites in Grüne Heide in Germany, including a huge battery factory.
While the gates of Europe’s first gigafactory already opened in 2022, the company is now reconsidering part of its future investment and announced to reorient towards the US.
The US is luring companies with its multi-billion heavy Inflation Reduction Act (IRA), which offers generous subsidies and tax breaks for the green industry.
“The IRA tax breaks have influenced our original plans such that the focus of cell production now lies on the manufacturing facilities in the USA,” a Tesla spokesperson told FAZ.
Tesla had initially announced plans to create the most significant battery production site in the world in Germany.
The reorientation of the US is coming at an inconvenient time for the German government.
Only on Tuesday, Economy Minister Robert Habeck announced that Germany aims to strengthen the “production capacities for renewable energies and electricity grids in Germany and Europe.”
The European Commission also put forward similar plans. In early February, Commission President Ursula von der Leyen announced the EU’s response to counter the IRA: the Green Deal Industrial Plan.
“We know that in the next years, the shape of the net-zero economy and where it is located will be decided, and we want to be an important part of this net-zero industry that we need globally,” von der Leyen said at the time.
However, it is yet unclear how this response will be financed. While the IRA includes around $500bn to support the green industry, it remains yet to be seen whether the European response will consist of any fresh money or only repurpose existing instruments.
A high-ranking source from Europe’s aluminium sector recently warned about the risk of EU companies relocating to the US unless immediate action is taken.
“Many European countries have already announced plans to relocate their planned investments away from Europe and towards the USA. Companies from other regions are also being enticed: last month, the Korean solar panel manufacturer Hanwha Q Cells announced that it would spend €2.32bn on a new manufacturing facility in Georgia, USA,” the source said.
Instead of nagging, the EU should take lessons from the US Inflation Reduction Act (IRA) by stopping “punishing” its own industries and starting to help them drive decarbonisation, a high-ranking source from Europe’s aluminium sector told EURACTIV.
“We lost our solar PV manufacturers to China, who now control over 80% of every key stage of the PV manufacturing process. All of Europe’s wind turbine manufacturers are haemorrhaging money,” the source said, adding that when it comes to the raw materials, the situation is even worse.
“The US IRA should be a wake-up call for Europe. Instead of complaining about the American approach, we should see what we can learn from it. And instead of punishing our own industries, we should see how we can help them drive decarbonisation,” the source concluded.