America and Europe at Low Battery

The U.S. and the EU have established that there is a need to quickly phase in electric cars, but neither has the battery production capacity of super-subsidized China. Thus, both are copying Beijing and clashing with each other. We will see up to what point. But things like this happen when governments try to replace markets.

Money, money, money. To hurt each other. The trans-Atlantic battle which has opened up over lithium-ion battery production is a zero-sum game: Whatever the U.S. gains, Europe loses, and vice versa. In its $370 billion Inflation Reduction Act, the Biden administration plans to allocate $150 billion to subsidize the construction of manufacturing plants in the U.S. to produce the batteries required for electric cars. The result of this is that a significant number of investments destined for Europe — including Italy — could be diverted to the U.S. On March 7, The Financial Times revealed that Volkswagen is reconsidering an investment in an Eastern European battery plant to replace it with one in North America, attracting tens of thousands in subsidies. But VW is hardly alone. In one study, the European Federation for Transport and Environment, a nongovernmental organization in the field, calculated that 68% of lithium battery production planned for Europe could be canceled, reduced or postponed. Of the 1.8 terawatt-hours predicted for 2030, 16% is at high risk of leaving, 52% runs a medium risk and the remaining 32% has a low risk.

T&E indicates that production capacity for 18 million electric cars could be lost from Europe. The study cites three giga-plants that could be built in the U.S. and no longer in the European Union: Tesla Grünheide, southeast of Berlin; Northvolt in Heide, also in Germany, in Schleswig-Holstein; and Italvolt in Scarmagno, Italy, on an old Olivetti site north of Turin. A definitive decision has not yet been made for these and other plants. On the one hand, various American states are sending messages to attract investment, highlighting the billions of dollars in subsidies they could spend. On the other, on March 14, the EU Commission will present its counterplan — ultimately, public finance (we will have to see exactly how) — to oppose that of the Americans. A trans-Atlantic battle of the subsidies. In essence, the U.S. and EU have established that there is a need to phase in electric cars quickly, but neither has the battery production capacity of super-subsidized China. Thus, both copy Beijing and clash with each other. We will see up to what point. But things like this happen when governments try to replace markets.