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Lured With Tax Credits to the U.S., Tesla Could Drop Plans for the German Battery Factory

Reports indicate that Tesla is pausing its plans to make battery cells in Germany. The main reason could be the attractive tax credits from the Inflation Reduction Act (IRA), which caused Tesla to reconsider its position in Europe.
Tesla could drop plans for German battery factory 7 photos
Photo: Tesla
Robots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactoryRobots build structural battery packs with 4680 cells at Tesla gigafactory
As we've already mentioned in a previous story, the incentives promised by the U.S. government to companies building battery cells in the U.S. are staggering. These can amount to up to $45 per kWh in certain conditions, cutting the cost of producing Li-ion cells in half. As expected, this not only turned U.S. battery production facilities into outright money printing factories but also incentivized battery companies all over the world to set shop in the U.S.

Of course, as always, there are winners and there are losers. In the case of the IRA, the losers are the regions outside North America, mainly South Korea and Europe. In just one example, Tesla is analyzing the opportunity of going on with the plans of a German battery factory. According to Wall Street Journal reports, cited by Automotive News, Tesla aims to benefit from the tax credits offered to companies that produce components, including Li-ion batteries, in the U.S.

As you'd imagine, the $45/kWh is compelling enough to consider abandoning plans for a European battery plant and shipping the batteries from the U.S. Tesla was expected to start battery production in Germany as early as next year, helping ramp up Model Y production at its Berlin gigafactory. The battery plant should've been integrated with Giga Berlin, providing 50 GWh of battery production each year. This is enough to build more than 600,000 electric vehicles a year, with room to spare.

As you see, the IRA dealt a blow to European battery manufacturing ambitions, especially as Tesla intends to ship the equipment destined for battery production in Gruenheide to the U.S. instead. And it wouldn't be just Tesla, as other battery manufacturers are crunching the numbers and probably get to the same conclusion. No wonder the European Union consider attacking IRA at the World Trade Organization. Other countries, like South Korea, Brazil, and Japan, will likely follow suit.
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About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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