As the United States invests heavily in electric vehicle manufacturing, European countries are concerned about losing investments and becoming reliant on China. This article explores the competition between Europe and the US for battery factories and its implications for the future of electric vehicle production.
Europe is facing a major obstacle in its efforts to establish a strong electric car industry as the United States moves ahead with significant subsidies. This has raised concerns among many Europeans who worry about the approach being taken, despite their previous criticism of the US for not doing enough to combat climate change.
Germany, France, Britain, and other European countries are deeply worried that the US strategy will attract a large portion of the investment in electric car and battery factories that would otherwise come to Europe. Instead, it could be diverted to the United States or Asian countries like China and South Korea.
To address this risk, European leaders, including Germany’s Robert Habeck, are trying to secure the cooperation of Northvolt, one of Europe’s few domestic battery companies. European countries are offering Northvolt hundreds of millions of euros to establish factories within Europe. However, the allure of the American market has tempted Northvolt to consider investing in the United States instead.
Emma Nehrenheim, Northvolt’s chief environmental officer, recognizes the appeal of the American market and highlights the need for Europe to act quickly to secure its position. European officials are concerned about the growing competition with the United States for the necessary components for electric vehicle manufacturing, fearing it could be counterproductive.
President Biden’s main climate policy, the Inflation Reduction Act, has enticed investment away from Europe through tax credits and incentives. Cecilia Malmstrom, a former European trade commissioner, warns that the United States has started a “massive subsidy race” and urges leaders to collaborate rather than compete against each other.
US officials argue that American and European policies complement each other, as both aim to reduce emissions and promote the adoption of electric vehicles. They also point out that battery factories and lithium processing plants are being constructed on both sides of the Atlantic.
Efforts are underway to align US and European policies, such as allowing European battery materials and components to qualify for US tax credits. The Biden administration recognizes the potential benefits of collaboration, emphasizing that technological innovation and cost reductions resulting from these investments will benefit the global economy and the fight against climate change.
However, European leaders have been compelled to implement new industrial policies in response to the American subsidies. The European Commission has proposed the Critical Raw Materials Act, a legislation aimed at securing supplies of crucial battery materials within the European Union. The legislation also promotes financial support for suppliers and manufacturers.
While investments from the United States and Europe will boost electric vehicle sales, concerns arise that the simultaneous growth of both markets could result in a zero-sum game. Business executives have criticized the bureaucratic and slow process of applying for financial aid in Europe, contrasting it with the simple and fast US approach, which mainly focuses on tax credits.
The future of European auto manufacturing, especially for German companies, hangs in the balance. Chinese manufacturers have already gained market share in Europe, prompting European automakers to urgently establish the necessary supply chains for electric vehicle production.
European leaders are taking action to promote battery production within their countries. Initiatives include the establishment of a battery factory in France, joint ventures, and collaborations with companies like Rock Tech Lithium and Northvolt. However, Europe must act swiftly to avoid falling behind the North American market.
The competition intensifies as Chinese battery companies, aiming to avoid political backlash in the United States, heavily invest in Europe. German carmakers face a delicate situation as they try to balance their reliance on Chinese suppliers with maintaining good relations with the Chinese government.
Northvolt, with its focus on controlling all aspects of battery production, presents an opportunity for Europe to achieve supply chain independence and prioritize environmentally responsible practices. While Northvolt is not currently among the world’s top battery suppliers, it is expanding production and planning a factory in the US.
Despite the challenges and competition, Europe’s strong demand for electric vehicles gives it an advantage. However, European countries must act swiftly to support the battery industry, or they risk losing momentum to the North American market. Collaboration, coherence, and strategic investments are key to ensuring Europe’s position in the growing electric vehicle industry.