Germany and France win €10bn race for electric battery factories

Europe, home to carmakers such as Volkswagen and BMW, has been trying to lower dependency on Asian countries for batteries that will power green electric cars.

Two electric vehicle battery makers plan to spend around €10bn on factories in Europe, a big win for Germany and France in the subsidy race with the US.

Both plants will start construction in 2026, employ thousands of people and supply batteries to European car makers.

Sweden's Northvolt said it is set to pick Heide in northern Germany for its factory as long as subsidies are approved, after months of worry that it would opt for an investment in North America over Europe, while Taiwan's ProLogium announced a plant in the French city of Dunkirk.

Europe, home to carmakers such as Volkswagen and BMW, has been trying to lower dependency on Asian countries for batteries that will power green electric cars.

Northvolt, alongside Volkswagen, is the furthest ahead among just a handful of European players paving the way for a home-grown battery industry, with a large chunk of planned capacity in Europe to be owned by Asian players. The plant by Taiwan's ProLogium would be its first overseas car battery factory.

Both Germany and France had to sweeten the subsidy pot after the US last year unveiled major tax subsidies to cut carbon emissions to boost domestic manufacturing, giving the battery makers an attractive alternative.

The subsidies for Northvolt, estimated to be around half a billion euros, would be the first provided by Germany from Europe's new 'Temporary Crisis and Transition Framework', adopted in response to Russia's invasion of Ukraine and expanded this year to support green transition projects.

The subsidies still need to be approved by the European Commission.

A second plant could also be constructed in parallel elsewhere, a Northvolt spokesperson said, indicating the decision to build in Germany did not exclude the possibility of a further plant in North America.

Foreign and domestic companies have invested in Germany to feed its growing electric vehicle industry. CATL, which has been expanding rapidly outside China, is ramping up production of its plant near Erfurt in Germany and BASF is building a battery materials site in Schwarzheide, eastern Germany.

US Microvast, meanwhile, already built a factory in Ludwigsfelde, south of Berlin.

For ProLogium, French president Emmanuel Macron lobbied for the factory to beat out other contestants like Germany and the Netherlands, offering deal sweeteners and competitive power prices, executives from the Taiwanese company said. 

President Macron's government is eager to use the recent relaxation of EU state aid rules to offer new tax breaks and other subsidies to encourage investment in green technologies. He announced earlier this week the government would offer a new tax credit worth up to 40% of a company's capital investment in wind, solar, heat-pump and battery projects.

Reuters