Volkswagen Group has reportedly halted its plans to establish battery plants across Europe, as it waits for the EU’s response to the Inflation Reduction Act in the US. The Act could offer the Group up to $10.5 billion in incentives. Volkswagen will now focus on selecting a site for a US battery plant, while it waits to see what sort of conditions and incentives will come into play in what is being called the “EU Green Deal.”
Volkswagen Group has doubled down on electrification and has even increased its sales targets for passenger EVs. While other German automakers are at odds with the EU Commission over the impending ban on new combustion vehicle sales by 2035, Volkswagen has committed to electrification. The Group had previously outlined plans for six new battery gigafactories throughout Europe this decade, including a site in Skellefteå, Sweden, through a joint venture with NorthVolt, scheduled to open this year.
Last month, VW Group sub-brand Seat announced it would revamp its production facilities in Spain to include a new battery facility for other Group EVs. Volkswagen has also been exploring the location of a battery plant for Eastern Europe but has said that it will not share a final decision until sometime in the first half of 2023.
Volkswagen Group is reportedly halting further development as it awaits the EU’s response to the US’s Inflation Reduction Act, which the Group believes could offer billions of dollars in incentives. Financial Times reports that Volkswagen Group has put plans for its pending battery plant in Eastern Europe on hold to focus on a separate facility in the US. The reasoning behind this decision is the estimated $10.5 billion the global automaker could receive in incentives by bringing EV battery production to US soil.
European automakers, including Volkswagen, initially opposed President Biden’s $369 billion subsidy package to bolster local EV and battery production. However, many have now come around after realizing the benefits of shifting production stateside. Last week, Volkswagen told EU officials that it expects to claim between $9.5-$10.5 billion in subsidies and loans from the Inflation Reduction Act (IRA) over the lifetime of its pending North American battery plant.
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The EU Commission has been working on its own local subsidies for EV and battery production, but industry executives have said it hasn’t been able to compete with the benefits of the IRA so far. We should learn more next week when the EU Commission publishes a Net Zero Industry Act in response to the IRA. Volkswagen says it will be looking for “the right framework conditions” before committing to build any more battery plants in Europe.
Volkswagen Group has not publicly announced the location of the North American plant. Scout Motors, the Group’s newest brand, recently announced it will set up its production footprint in South Carolina, where we may also see Audi EV production someday, although that has not been confirmed. Either way, Volkswagen has already secured raw materials vital to EV battery production from the Canadian government and should be ready to go in North America when it chooses its future home for the battery plant.
