Why are EU battery manufacturers shifting bases to the US?

The European Union (EU) will fall far behind its ambitious energy transition goals for renewable energy, clean technology capabilities and domestic supply chain investments, according to Rystad Energy's research and analysis.

Several EU battery manufacturing companies are now shifting their interest to the United States, whose better tax credits and policies supporting renewable energy appear to have attracted some companies, making them look to the United States for better returns. A recent report by global energy think tank Rystad Energy pointed out this shift.

Rystad Energy's report pointed out that unlike China, the EU has invested less in its net zero goals. This could create obstacles to its clean energy goals, the report said. The EU plans to reduce emissions by 92% by 2040 and achieve net zero emissions by 2050.

However, the migration of EU battery manufacturers hints at another challenge that the industry will face. The report attributed the trend mainly to the tax credit benefits of the US Inflation Reduction Act (IRA).

“Some European battery manufacturers are looking across the ocean for greener soil, underscoring the need for competitive development conditions,” the Rystad report said. “For example, Norway-based FREYR Battery has moved its headquarters to the United States and set up a large factory in Georgia to take advantage of the tax benefits of the Inflation Reduction Act.”

It also added that “Volkswagen, after initially investing heavily in Northvolt, is now exploring opportunities in Canada to align with the Inflation Reduction Act and maximize tax credits, which is indicative of a broader trend in the manufacturing industry to take advantage of a favorable policy environment and sends a clear signal to policymakers.”