European leaders have complained for years that the United States was not doing enough to combat climate change. Now that the Biden administration has spent hundreds of billions of dollars on that case, many Europeans are complaining that the United States is going about it the wrong way.
That new criticism stems from a deep fear in Germany, France, Britain and other European countries that Washington’s approach will harm the allies it is supposed to be working with, causing much of the new investment in electric car and battery plants that has yet to materialise. were not destined to be lured away. China, South Korea and other Asian countries.
That concern is the main reason why some European leaders, including Germany’s second highest official Robert Habeck, have taken a path to Vasteras, a town about 90 kilometers from Stockholm best known for a Viking burial mound. and a Gothic cathedral.
Officials have traveled there to bring Northvolt, one of Europe’s few homegrown battery makers, to justice. Headed by a former Tesla executive, Northvolt is a small player in the global battery industry, but European leaders offer it hundreds of millions of euros to build factories in Europe. Mr. Habeck visited in February to lobby the company to push through its plan to build a factory near Hamburg, Germany. The company had considered putting off investing in the United States instead.
“It’s certainly appealing to be in America right now,” Emma Nehrenheim, Northvolt’s chief environmental officer, said in an interview in Vasteras last month. Northvolt declined to comment in detail on talks about the Hamburg plant, which the company committed to in May.
The battle over Northvolt’s plans is an example of the intense and, according to some European officials, counterproductive competition between the United States and Europe as they seek to acquire the building blocks for electric vehicle production to avoid becoming dependent on China , which dominates the battery supply. chain.
Auto experts said the tax cuts and other incentives offered by President Biden’s key climate policy, the Inflation Reduction Act, had siphoned some investment out of Europe and pressured European countries to offer their own incentives.
The United States has provoked a “massive subsidy race,” Cecilia Malmstrom, a former European trade commissioner, said at a panel discussion at Washington’s Peterson Institute for International Economics last month. She called on leaders to “jointly invest in the green transition and not compete with each other”.
Biden officials have argued that US and European policies are complementary. They have noted that government and private money going into electric cars and batteries would lower prices for car buyers and put more zero-emission vehicles on the road.
US officials add that construction of battery plants and plants for processing lithium and other materials is booming on both sides of the Atlantic.
Efforts by governments to promote electric vehicles “will encourage a degree of technological innovation and cost savings that will benefit not only Europe and the United States, but also the global economy and our global efforts to meet the challenge posed by the climate change,” said Wally Adeyemo, the deputy finance minister, in a recent interview.
The Biden administration has also spoken with European officials to make cars made from European battery materials and components eligible for US tax credits. And the administration has interpreted the IRA, which Mr Biden signed into law in August, to leave room for producers in Europe and elsewhere to take advantage.
“You see less concern from Europe that those companies are being lured from Europe to America,” said Abigail Wulf, who leads the Center for Critical Minerals Strategy at SAFE, a nonprofit organization.
Yet the law has forced European leaders to implement a new industrial policy.
In March, the European Commission, the administrative arm of the European Union, proposed the Critical Raw Materials Act, legislation to ensure the supply of lithium, nickel and other battery materials. A piece of legislation calls for the EU to process at least 40 percent of the raw materials the car industry needs within its own borders. The alliance of 27 countries also allows countries to provide more financial support to suppliers and manufacturers.
The money the United States and Europe put into electric vehicles will boost sales, says Julia Poliscanova, senior director at Transport & Environment, a Brussels-based advocacy group. The legislation, which needs the approval of the European Parliament and EU countries’ leaders, would also bring some coherence to the fragmented policies of national governments, she said.
But Ms Poliscanova added that European and US policies threaten to cancel each other out. “Because everyone is scaling at the same time, it’s a zero-sum game,” she said.
Business leaders have complained that applying for financial aid in Europe is bureaucratic and slow. The Inflation Reduction Act, which focuses on tax credits, is simpler and faster, says Tom Einar Jensen, CEO of the battery manufacturer Freyr, which is building a factory in Mo i Rana, in northern Norway, and plans to open more factories in Finland. and near Atlanta.
The IRA has led to “a dramatic rise in interest in US-produced batteries,” Mr Jensen said in an interview.
The future of European car production is at stake, especially for German companies. Mercedes-Benz, BMW and Volkswagen have already lost market share in China to local automakers like BYD. Chinese car manufacturers, including BYD and SAIC, are also entering Europe. By selling cars under the British MG brand, SAIC controls 5 percent of the European electric vehicle market, putting it ahead of Toyota and Ford in that fast-growing segment.
European automakers are frantically trying to build the supply chains they need to bring electric vehicles to market.
In France, President Emmanuel Macron wants to turn a northern region, where factory jobs have declined, into a hub of battery production.
On Tuesday, Automotive Cells Company, a joint venture between Stellantis, Mercedes-Benz and TotalEnergies, inaugurated a plant in France’s Billy-Berclau Douvrin that aims to produce 300,000 electric batteries annually by the end of 2024. ACC also plans to spend a total of €7.3 billion, or $7.8 billion, in Europe, including opening factories in Germany and Italy, a deal sealed with €1.3 billion in government support.
In Salzgitter, Germany, about 25 miles from Volkswagen’s headquarters, steel beams tower over concrete foundations as excavators and dump trucks buzz nearby. In just a few months, the contours of a battery factory have emerged from the field.
Volkswagen hopes to have battery-making machines installed before the end of the summer. By 2025, the automaker aims to produce battery cells for up to 500,000 electric vehicles per year — a timeline the company said was only possible because the factory was built on land it owned.
Volkswagen is also building a factory in Ontario, but the company made the decision to do so only after the Canadian government adjusted US incentives.
In Guben, a small town on the German border with Poland, Rock Tech Lithium, a Canadian company, is building a factory to process lithium ore. Mercedes has an agreement with Rock Tech to supply lithium to its battery manufacturers.
These projects will not come into full production in the coming years. Recently, the Guben site was an open field. The only construction activity was a truck dumping loads of crushed stone with a deafening squeal.
Europe has some advantages, including strong demand for electric cars: About 14 percent of new cars sold in the EU in the first three months of this year were twice as many as in the United States, according to Schmidt Automotive Research.
But if Europe doesn’t act quickly to help the battery industry, “you really lose momentum against the North American market,” said Rock Tech CEO Dirk Harbecke.
Chinese battery companies have largely avoided the United States for fear of a political backlash. But according to the Mercator Institute for China Studies and the Rhodium Group, Chinese battery makers have announced investments in Europe worth $17.5 billion since 2018.
Political tensions between Western governments and China have left German automakers in a delicate position. They don’t want to be too dependent on Chinese supplies, but they can’t afford to displease the Chinese government.
BMW, Volkswagen and Volvo plan to buy cells from a factory in Arnstadt, Germany, run by CATL, a Chinese company that is currently the world’s largest manufacturer of batteries for electric vehicles.
To balance their reliance on Chinese suppliers, European executives and leaders are happy to work with Northvolt, whose CEO, Peter Carlsson, oversaw Tesla’s supply chain for more than four years.
Northvolt wants to control all steps of battery making, including refining lithium and recycling old cells. That should help Europe become independent of the supply chain and ensure that batteries are produced in the most environmentally friendly way, said Ms. Nehrenheim, who is also a member of Northvolt’s board of directors. “We are de-risking Europe,” she said.
The company develops production techniques at its complex in Vasteras. Northvolt’s first full factory, at a site in Sweden 200 kilometers south of the Arctic Circle chosen for its abundant hydropower, is the size of the Pentagon. Northvolt also plans to build a US factory, but has not yet announced a location.
Still, the company is ramping up production and is not among the top 10 battery suppliers in the world, according to SNE Research, a consulting firm. And construction of the Hamburg plant is on hold until EU officials approve German subsidies.
Anne Swanson And Liz alderman reporting contributed.
