Funding for battery cell plants: expensive jobs

In Europe, a subsidy race to establish battery cell factories has broken out.

Countries in southern and eastern Europe are attracting investors with large subsidies, some of which are financed from EU programs for regional development.

Western European countries like Germany want to counter this and are discussing how they can use their own funding framework to attract new projects.

This puts automakers and their suppliers in an advantageous position.

You can base investment decisions to a large extent on which location pays the most.

More than 30 battery cell factories for electric cars are already planned in Europe.

More are being announced all the time, so there is no longer a shortage of the kind that was seen a few years ago.

Instead, some companies are already talking about overcapacity that is becoming apparent on the market.

Against this background, a rethink is necessary.

The public sector has given the impetus for locating production in Europe, now market mechanisms have to take effect again and future projects have to be more self-supporting.

Strategic Technologies in Europe

Battery cells are the heart of electric cars, accounting for up to 40 percent of the added value.

So far, the vast majority of them have come from Asian manufacturers such as CATL, LG Chem or Panasonic.

The EU and its member states want to change that.

They are following a paradigm shift that does not only affect battery cells.

Europe wants to bring strategically important technologies – including semiconductors and artificial intelligence – under its own control.

Global political tensions play a role here, raising the question of whether the proven global division of labor will continue to function reliably in the future.

The trade unions are also pushing for more funding for cell factories in this country.

They hope that the new facilities will absorb some of the work that will be eliminated with the conversion of car production from combustion engines to e-mobility.

The effects of this reduction can be considerable and cannot yet be foreseen in their entirety.

Because they also depend on how quickly diesel and petrol vehicles disappear from the market and how quickly the new drive systems gain momentum.

Electric cars can be produced with fewer employees, which is accelerated by advances in productivity, new manufacturing techniques and digitalization.

However, new jobs in the cell factories are expensive.

They will remain manageable, also because production only makes economic sense if it is highly automated.

In addition, the framework conditions in this country are unattractive.

Above all, the generous subsidies for renewable energies compared to other countries have ensured that Germany's electricity costs have been particularly high in recent years, a hurdle for the energy-intensive production of battery cells.

Such difficulties have long been downplayed.

Now politicians are trying to level out the differences to other countries with new grants.

The situation becomes particularly questionable when funding for projects by the Member States competes with EU funds.

This is becoming apparent in Lower Saxony, where the state involved in Volkswagen wants to persuade the group to build a second cell factory in Emden after Salzgitter.

However, other countries are vying for the project, for example in Eastern Europe, which can access special funding.

The state is now asking the federal government for help.

Such a race cannot be justified with security of supply.

Because neighbors like Poland or the Czech Republic can be considered reliable partners, quite apart from the fact that their more favorable framework conditions offer long-term cost advantages for Europe's automotive industry.

In addition, with the current projects, politicians are usually promoting a technology that will be outdated in a few years.

New variants such as the solid cell will replace the current lithium-ion generation.

Critical raw materials are also in focus, such as graphite, which is often obtained under questionable circumstances and could be replaced by agents such as silicon.

Research and development that enable such leaps in technology are worthy of funding.

The current subsidies for standard technology, on the other hand, give rise to production that will neither cover costs nor be competitive in the long term in most European countries.