Powering Up: Germany and France Secure €10bn for Electric Battery Factories

"Electric Vehicle Battery Makers to Invest €10bn in European Factories, Boosting Germany and France in Subsidy Race Against US"

Two electric vehicle battery makers have announced plans to invest approximately €10bn in factories in Europe, a significant victory for Germany and France in their competition for subsidies with the US. These factories, set to begin construction in 2026, will create thousands of jobs and supply batteries to European car manufacturers. Sweden’s Northvolt has identified Heide in northern Germany as the location for its factory, subject to approval of subsidies. Taiwan’s ProLogium, meanwhile, has announced a plant in the French city of Dunkirk. Europe, home to carmakers such as Volkswagen and BMW, has been attempting to reduce its reliance on Asian countries for batteries to power green electric cars.

Northvolt, which is leading the way for a home-grown battery industry alongside Volkswagen, is ahead of its European competitors in terms of planned capacity, although a significant portion of this capacity will be owned by Asian players. ProLogium’s factory in Dunkirk will be its first overseas car battery factory.

The US government’s announcement of major tax subsidies last year to reduce carbon emissions and boost domestic manufacturing prompted Germany and France to offer more favourable subsidies to attract battery makers. Northvolt is expected to receive subsidies of approximately €500m, which would be the first provided by Germany from Europe’s new ‘Temporary Crisis and Transition Framework’. This framework was adopted in response to Russia’s invasion of Ukraine and has been expanded this year to support green transition projects. However, these subsidies still require approval from the European Commission.

A spokesperson for Northvolt has indicated that a second plant could be constructed elsewhere in parallel, suggesting that the decision to build in Germany does not preclude the possibility of another plant being built in North America. Other foreign and domestic companies have invested in Germany to support its growing electric vehicle industry, including CATL, which is expanding production at its plant near Erfurt, and BASF, which is constructing a battery materials site in Schwarzheide. US-based Microvast has already built a factory in Ludwigsfelde, south of Berlin.

ProLogium’s executives have stated that French President Emmanuel Macron lobbied for the factory in Dunkirk, offering deal sweeteners and competitive power prices to beat out Germany and the Netherlands. President Macron’s government is keen to use the recent relaxation of EU state aid rules to offer new tax breaks and other subsidies to encourage investment in green technologies. Earlier this week, he announced that 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.

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