Germany Backs Northvolt Plant in Boost for Europe’s EV Industry

(Bloomberg) -- Germany has pledged significant state support to Europe’s main battery maker Northvolt AB to build a plant in the country’s north in a win for the region’s electric-vehicle industry.

The Swedish company now sees a “distinct possibility” of going ahead with two plants at the same time, one in Germany and one in North America. Earlier, Northvolt warned it might postpone the plant in the town of Heide in favor of investment in North America because of rich incentives on offer.

Germany’s funding, subject to approvals by the European Union, “will unleash a billion-dollar private investment that will create 3,000 direct jobs in Heide and thousands more in the surrounding industry and service sector,” the government said Friday in a statement.

The move illustrates how aggressive subsidies and tax credits in the US and Europe are spurring investment in green technology. With Chinese battery makers pouring billions of euros into new European facilities, Northvolt’s decision delivers a needed boost to the continent’s ambitions to compete in the rapidly growing industry around electric vehicles.

The company, which counts Volkswagen AG and BMW AG among its customers, first announced the multi-billion euro plant in Germany’s Heide over a year ago. Targeting a production start in 2026 with an eventual annual capacity of 60 gigawatt-hours — which would make it Germany’s biggest — the facility will make enough cells to power roughly 1 million electric vehicles. 

Following the commitment by the German government, Northvolt is taking next steps on its plans for Heide, Northvolt Chief Executive Officer Peter Carlsson said. 

Tax Credits

The US and Europe are increasingly vying for future green tech investment in the race to reduce CO2 emissions. Tax credits as part of US President Joe Biden’s Inflation Reduction Act are set to cover about 30% of cell manufacturers’ operating costs, Northvolt has calculated. Europe’s most advanced home-grown battery play last year started shipments from its cell plant in northern Sweden. 

The EU, alongside national incentives, is stepping up efforts to level the playing field. The bloc already offers generous support, but getting access to funds is an overly cumbersome process, industry players say. 

Meanwhile, Asian firms have been setting up factories across the continent. Taiwanese battery maker ProLogium Technology Co. said this week it aims to start mass production of a new generation of cells in France as part of its project to invest as much as €5.2 billion ($5.7 billion) in the country. 

Contemporary Amperex Technology Co. Ltd, the world’s biggest cell manufacturer, this year started output at its first European plant in eastern Germany and it’s adding a €7.3 billion facility in Hungary with Mercedes-Benz AG and VW among its customers. Chinese-owned Envision AESC plans to build battery plants in Spain and France, and EVE Energy Co., BMW’s second supplier for cells produced in Europe, has bought land in Hungary. 

Chinese battery maker SVolt Energy Technology Co. is set to expand its footprint in Europe to as many as five factories, with talks to supply the region’s carmakers well underway.

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