Rising energy prices: Volkswagen says European EV battery factories are ‘barely unprofitable’

Volkswagen’s CEO wrote that electric vehicle battery factories within the European Union are not “almost more profitable” in the face of rising energy costs.

According to Thomas Schaefer, in Germany and throughout the EU, it is now impossible to invest in new, much-needed industrial projects, such as battery cell factories. He denounced the inability of politicians to control the rising energy prices which are here to stay.

Europe, and especially Germany, has been devastated by the loss of Russian energy exports since the war in Ukraine and Western sanctions against Moscow.

The EU, UK and US are all facing a severe energy crisis for most of 2022.

Europe’s largest economy and the most dependent on Russian gas imports, Germany has seen its industrial output fall due to high energy prices due to shortages.

Thomas Schaefer taught: “The United States, Canada, China, Southeast Asia and regions like North Africa are advancing. »

“If we fail to quickly and firmly reduce energy prices in Germany and Europe, investments in energy production or new battery cell factories in Germany and the EU will not be profitable”he wrote on LinkedIn on November 28.

“The creation of wealth in this area will take place elsewhere. »

Volkswagen ID.3 electric vehicles in a storage tower after assembly at the ‘Glasserne Manufaktur’ (Glass Manufactory) production site on June 8, 2021 in Dresden, Germany. The Dresden plant currently produces 35 ID.3 cars per day. ID.3 and ID.4 cars are also produced at the VW plant in Zwickau, located in the same region. (Sean Gallup/Getty Images)

Thomas Schaefer welcomed the joint effort on industrial policy cooperation between French and German economy ministers Bruno Le Maire and Robert Habeck last week, but said their program “is lacking in important areas and has not met the priorities expected”.

The EU’s economic difficulties are compounded by energy costs and US trade policy

Last summer, Biden’s Inflation Reduction Act also deepened Europe’s economic crisis.

The new climate and tax law aims to boost domestic production of electric cars in the United States and reduce its reliance on foreign countries such as China for parts and battery materials.

According to European Union officials, the subsidies and restrictions hurt European businesses and violate World Trade Organization (WTO) rules by discriminating against non-US companies.

Economy ministers from France and Germany have both opposed Biden’s economic program, which they see as a partial reversal of trade policies established over decades.

In a November 21 press briefing attended by the two ministers, Bruno Le Maire compared America’s industrial policy to that of communist China, whose government offers large subsidies to local companies to stimulate domestic production.

China has been rocking this new globalization for a very long time with massive state aid reserved exclusively for Chinese products. The United States has moved before our eyes in this new globalization to develop its industrial capacity on American soil.said Bruno Le Maire.

According to German Minister Robert Habeck, European authorities must act quickly and decisively to strengthen European industry, if no compromise is found in the new American policy.

Emmanuel Macron is pushing to win EU-wide support for a ‘Buy European Act’ in retaliation for Joe Biden’s Reduction Inflation Act, but German Chancellor Olaf Scholz has announced that he will try to negotiate with Joe Biden on Trade and Technology. The Council (CTT) is scheduled for December 5, which will provide an opportunity to discuss relations between the European Union and the United States.

The Germans are reluctant to enter a trade war with the US

According to Bloomberg, the Germans see the trade conflict with the United States as a strategic mistake when the EU is already at odds with Russia.

“It will produce no winners, only losers”said German Finance Minister Christian Lindner at a press conference organized by the newspaper Sueddeutsche Zeitung this Sunday.

“From my point of view, the strategy to take is to talk to the United States. The goal is not to hurt the Biden administration”said Christian Linder, against the Buy European Act.

“An opportunity to talk about a new transatlantic free trade”he continued.

The chancellor for his part did not rule out the idea of ​​increasing European subsidies granted to companies in response to the new American policy.

Volkswagen is demanding more from EU politicians

EU programs are not sufficiently focused on “short-term growth, expansion and industrialization of production”says Thomas Schaefer, critic “outdated and bureaucratic state aid rules”.

The remarks come as Volkswagen announced earlier this year plans to build six electric vehicle battery factories in the EU by 2030.

Site of Volkswagen’s future 16 gigawatt-hour battery cell factory, ‘SalzGiga’, next to VW’s component factory in Salzgitter, north-central Germany, May 18, 2022. (JOHN MACDOUGALL /AFP via Getty Images)

The batteries will be manufactured by his company PowerCo, which began construction of its main factory in Germany in July 2022 after reaching a $3.1 billion alliance with Umicore last fall for the production of cathode materials. .

“We have no time to lose. The EU urgently needs new instruments to avoid fraudulent deindustrialisation and keep Europe attractive as a location for future technologies and jobs”said Thomas Schaefer.

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