VW pauses on Europe battery plants, awaiting EU response to U.S. Inflation Reduction Act

Volkswagen Group is waiting to hear Europe's response to the U.S. Inflation Reduction Act before progressing with plans to build further battery plants in Europe, the automaker said on Wednesday.

The Financial Times reported that VW is pausing plans for a battery cell factory in eastern Europe and prioritising building a plant in North America where it could reap 9 billion to 10 billion euros ($10.54 billion) in subsidies.

Asked about the FT report, a VW spokesperson said the automaker is still evaluating suitable locations for its next cell factories in Eastern Europe and North America and no decisions have been made yet.

"We stick to our plan to build cell factories for about 240 GWh in Europe by 2030, but for this we need the right framework conditions. That is why we wait and see what the so-called EU Green Deal will bring," VW said on Wednesday.

"It is the case that we are getting ahead far faster in North America," a person close to the matter told Reuters, declining to be named.

Under former CEO Herbert Diess, VW said in 2021 it would build 6 gigafactories in Europe, with Hungary, Poland, Slovakia and the Czech Republic in the running for one of them to be opened in 2027.

The first of the six plants opens in Sweden this year as a joint venture with Northvolt, in which VW holds a 20 percent stake. A second will be built in Germany with China's Gotion High-Tech, in which VW has a 26 percent stake. It will produce new unified cells for volume segment EVs.

Another cell factory will be built in Sagunto, near Valencia, Spain, with production starting in 2026.. 

Skoda has said the Czech Republic, the brand's home country, would be an ideal location for "at least one" of the battery cell factories

VW Group said in October last year it planned to firmly settle on a location for the eastern Europe plant in the first six months of 2023.

VW board member Thomas Schmall posted on LinkedIn last week that Europe risked losing "the race for billions of investments that will be decided in coming months and years" to the attractive conditions offered by the IRA.

Schmall said he participated in a discussion with EU officials via the European Battery Alliance last week on what conditions were needed in Europe for battery production.

These included state aid in line with China and North America, a raw materials strategy and affordable renewable energy, he said.

Northvolt has still not decided whether to build its next battery factory in Germany or expand first in North America.