IRA causes Volkswagen to postpone plans for European battery plants

Volkswagen is postponing its plans for its European battery plants, writes The Financial Times. It is one of many companies to relocate a significant part of their investments or production to the US because the investment climate is much more favourable.

Volkswagen wants to build six battery plants in Europe. But now it is pressing the pause button until the European Union comes up with an answer to the US Inflation Reduction Act (IRA), which makes investing in America more attractive. The IRA makes billions in subsidies and loans (up to $369 billion) available for investment in production facilities of green energy products such as EVs and battery cells.

In Europe, such subsidies are much smaller-scale and more incidental, making it less attractive for companies to invest in new plants here. This has already prompted several European companies - including BASF (a major German chemical company) and Northvolt (a Swedish battery startup), and Iberdrola (a Spanish energy company), to relocate a significant part of their investments or production to the US.

In recent months European leaders have emphasised the harmful impact of the IRA on European industry. According to some, it could even cause the deindustrialisation of Europe. French President Emmanuel Macron already expressed his discontent, claiming it is "not in line with the rules of the World Trade Organisation and... not in line with friendship."

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