Chased by U.S. subsidies, Tesla scraps big German battery plans

Tesla Inc said it had begun assembling batteries in Germany but would focus battery production in the U.S. under incentives from the Lower Inflation Act, making it one of the first companies to announce the plan prompted a shift in strategy one. The U.S. electric carmaker is also preparing to produce battery components such as electrodes, some of which will be shipped to the U.S. from its plant in Gruenheide, Brandenburg, Tesla said on Wednesday.

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February 23, 2023 at 6:44 am

A Tesla electric car can be seen on a production line in Germany. (Reuters)

Cars produced at the Brandenburg plant will use locally assembled batteries in the “near future”, it added. “Tesla’s battery production focus is currently in the United States due to the framework created by the U.S. Inflation Reduction Act (IRA),” the company said.

EU leaders worry that requiring a local component of most of the $369 billion IRA subsidy will encourage companies to move away from Europe and toward the US.

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Tesla rival Stellantis said on Wednesday it had localized production in the U.S. ahead of the IRA, while earlier this month industrial gas company Air Liquide pledged to take a historic opportunity to invest in clean energy aided by the IRA but gave no details.

Holcim AG, the world’s largest cement producer, expects the IRA to provide a strong impetus to its business in North America, with Linde estimating that the company’s total investment opportunities in the US alone could exceed $30 billion over the next decade.

The European Commission has proposed easing state aid rules for investments in renewable energy, decarbonized industry, hydrogen or zero-emission vehicles, even as Germany’s finance minister warned Europe against responding to the United States with excessive subsidies.

Tesla withdrew its application for more than 1 billion euros in aid from the German government in November 2021, when the company’s CEO, Elon Musk, tweeted that “all subsidies should be removed.” However, the automaker still has an open application for regional funding from the Brandenburg state government.

A spokesman for the German economy ministry said on Wednesday they were “working to clarify” the reasons behind Tesla’s decision. The Brandenburg state economics ministry said that, as far as it was aware, the route change would not affect the number of jobs at German factories.

Musk said in March 2022 that Germany’s 50 gigawatt-hour battery factory would achieve mass production by the end of 2023, but the targets for the factory and car production base were later than planned.

Tesla has been struggling to boost battery cell production in Fremont, California, and Austin, Texas, which experts attribute to new and unproven technology that the company has struggled to scale. The electric carmaker will hold its first investor day on March 1 to lay out the third part of its “master plan,” which Musk said will focus on expanding vehicle production and supply chains for battery materials.

Tesla said in late January that it would invest more than $3.6 billion to expand its Nevada Gigafactory, building two new plants, one for mass production of its long-delayed Semi electric truck and another for its new electric truck. 4680 battery.

First published date: Feb 23, 2023 06:44 IST

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