Volkswagen pauses on Europe battery plants, awaits EU response to IRA

By Jan Schwartz

HAMBURG (Reuters) -Volkswagen is waiting to hear what Europe's response to the U.S. Inflation Reduction Act will be before progressing with plans to build further battery plants in Europe, the company said on Wednesday.

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

The Financial Times previously reported that Volkswagen was pausing plans for a battery plant in eastern Europe, the next expected plant in the region, and prioritising building a plant in North America where it could reap 9-10 billion euros ($10.54 billion) in subsidies.

Asked about the report, a Volkswagen spokesperson said the carmaker was "still evaluating suitable locations for our next cell factories in Eastern Europe and North America. No decisions have been made yet."

Under former chief executive Herbert Diess, Volkswagen said in March 2021 it would build 6 gigafactories in Europe with total capacity of 240 gigawatt hours.

"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," Wednesday's statement said.

The first of the six plants is a Northvolt plant in Sweden, in which Volkswagen holds a 20% stake. A second in Germany will be built by 2025 with China's Gotion High-Tech, in which Volkswagen owns 26%.

Last March the carmaker picked a site near Valencia, Spain for a third plant.

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

Volkswagen 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.

($1 = 0.9489 euros)

(Reporting by Victoria Waldersee and Jan Schwartz; Editing by Friederike Heine and Bernadette Baum)