Europe set to have two Multimillion dollar Factories

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(Reuters) – Two electric vehicle battery makers plan to spend around 10 billion euros ($11 billion) on factories in Europe, they said on Friday, after Europe loosened state aid rules for green industry projects in a bid to win the subsidy race with the U.S.

Both plants will start production in 2026, employ thousands of people and supply batteries to European car makers.

After months of worry that it would opt for an investment in North America over Europe, Sweden’s Northvolt said it is set to pick Heide in northern Germany for its factory as long as subsidies are approved, estimated by one source close to the matter to be over 600 million euros.

Taiwan’s ProLogium, meanwhile, announced a new plant in the French city of Dunkirk after France offered deal sweeteners and competitive power prices, executives from the company said. With Taiwan a focal point in tensions between Washington and Beijing, the company also wanted to secure a base overseas.

Europe, home to carmakers such as Volkswagen (VOWG_p.DE) and BMW (BMWG.DE), has been trying to lower dependency on Asian countries for batteries that will power green electric cars, though the region still relies heavily on Asia for sourcing and processing raw materials like lithium, cobalt and manganese.

High energy prices and a lack of subsidies comparable to the $430-billion U.S. Inflation Reduction Act has prompted companies from Volkswagen to utility Enel and cement maker Holcim to call on the European Union to do more to encourage investment.

Volkswagen was expected to announce a battery plant location in Europe late last year but said in March it is awaiting more clarity from Europe on subsidies before making a decision.

For Northvolt, Europe’s ‘Temporary Crisis and Transition Framework’ (TCTF) which simplifies conditions for countries to grant aid to green projects and allowed Germany more freedom in offering support for the battery plant, helped firm up its plans to build in the region, a spokesperson said.

How energy prices could be brought down was unclear, the spokesperson added, though supply is not a concern given high amounts of offshore wind near the plant’s planned location.

Northvolt, alongside Volkswagen, is the furthest ahead among just a handful of European players paving the way for a home-grown battery industry, with a large chunk of planned capacity in Europe to be owned by Asian players.

The plant by Taiwan’s ProLogium would be its first overseas car battery factory. French President Emmanuel Macron lobbied for the factory to beat other contestants like Germany and the Netherlands.

Both Germany and France sweetened the subsidy pot after the U.S. last year unveiled its major tax subsidies to boost domestic manufacturing.

The subsidies for Northvolt would be the first provided by Germany under Europe’s TCTF programme, adopted in response to Russia’s invasion of Ukraine and expanded this year to support green transition projects. The support still needs the approval of the European Commission.

A second plant could also be constructed in parallel elsewhere, a Northvolt spokesperson said, including in North America.

Foreign and domestic companies have invested in Germany to feed its growing EV industry. CATL (300750.SZ), which has been expanding rapidly outside China, is ramping up production of its plant near Erfurt in Germany and BASF (BASFn.DE) is building a battery materials site in Schwarzheide, eastern Germany. Meanwhile, U.S. Microvast (MVST.O) built a factory in Ludwigsfelde, south of Berlin.