Tesla cuts German battery plans, lured by US incentives

BERLIN, Feb 22 (Reuters) – Tesla Inc (TSLA.O) has started assembling batteries in Germany but will focus cell production in the United States in light of tax incentives from the Curbing Inflation Act, said a spokesperson, one of the first companies to declare a shift in strategy prompted by the package.

The American manufacturer of electric vehicles is also preparing to produce cell components such as electrodes, some of which will be shipped from its site in Gruenheide in the state of Brandenburg, to the United States, said Wednesday the spokesperson for You’re here.

Cars produced at the Brandenburg site would in the “near future” contain locally assembled batteries, the spokesman added.

“Tesla’s cell production is currently focused on the United States due to the framework created by the United States’ Inflation Reduction Act (IRA),” the company said.

EU leaders have expressed concern that the local content requirements of much of the $369bn in IRA grants will encourage companies to ditch Europe for the US.

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Tesla rival Stellantis (STLAM.MI) said on Wednesday the IRA did not affect the strategy significantly, while earlier this month industrial gases company Air Liquide (AIRP.PA) is committed to taking advantage of a historic opportunity to invest in clean energy through the ERI. , but without giving specific details.

Holcim AG (HOLN.S), the world’s largest cement maker, expects the IRA to give a big boost to its North American business, and Linde (LIN.N), has seen the opportunity to Total investment for the company in the United States alone could exceed $30 billion over the next decade.

The European Commission has proposed to relax rules on state aid for investments in renewable energy, decarbonisation of industry, hydrogen or zero-emission vehicles, although the German finance minister has warned that Europe should not respond to American law with excessive subsidies.

Tesla withdrew its German state aid request of more than €1 billion for the battery factory in November 2021, and the company’s chief executive, Elon Musk, tweeted at the time that “all subsidies should be removed”.

However, the automaker still has an open application for regional funding from the Brandenburg government.

A spokesman for Germany’s economy ministry said Wednesday they were “working to clarify the reasons” for Tesla’s decision. Brandenburg’s economics ministry said that to its knowledge the change in course would not impact the number of jobs available at the German site.

Musk said in March 2022 that Germany’s 50-gigawatt-hour battery plant would reach volume production by the end of 2023, but the plant and car production site hit their targets later than expected.

Tesla has struggled to ramp up battery cell production in Fremont, California, and Austin, Texas, which experts have attributed to new and unproven techniques the company is struggling to develop.

It announced in late January that it would invest more than $3.6 billion to expand its Nevada gigafactory complex with two new factories, one to mass-produce its long-delayed semi-electric truck and the other to manufacture its new 4680 battery cell.

Reporting by Victoria Waldersee; Editing by Mark Potter, Jason Neely and Shounak Dasgupta

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