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Germany amps up battery production with massive state subsidies

To meet its Paris Agreement commitments, as well as other domestic decarbonisation objectives, the German government has recently ramped up investment in renewables. Part of this is through an investment scheme aiming to fund major battery manufacturing in the country. On Tuesday, June 30, German Minister of Economic Affairs and Energy Peter Altmaier officially awarded the government's first grant – worth €300 million – to battery company Varta.

"The establishment of innovative and sustainable battery cell production is a high priority for us in Germany," said Altmaier. "It is necessary to remain competitive during our energy and transportation transition, to create new jobs and to ensure prosperity. Today we have taken a large step toward large-scale domestic production of automotive and industrial batteries."

The initiative is part of a European Union IPCEI, Important Project of Common European Interest. Four other companies with battery-cell projects in Germany will also be receiving grants: BASF, BMW Group, Opel and Umicore.

The European Battery Alliance believes that the value of the market for European-made batteries could reach as much as EUR 250 billion by the mid-2020s. And lithium-ion batteries account for approximately 40 percent of the value creation of electric vehicles, says the German Economics Ministry.

The aim is for the projects underwritten by the government to begin making batteries in 2022 and enter industrial-scale production by the mid-2020s at the latest.

Producing batteries domestically rather than abroad is already a trend, explains Germany Trade & Invest (GTAI) automotive expert Stefan Di Bitonto.

"It's obvious right now that battery manufacturers are moving closer to their customer base," Di Bitonto says. "Germany is the heart of the European automotive industry, and we're seeing increased volume in investments in this area in various German regional states: most prominently CATL in Thuringia, Northvolt in Lower Saxony, Farasis in Saxony-Anhalt and most recently Tesla in Brandenburg. We believe that in future German automotive production will primarily get the batteries for its electric vehicles directly from Germany."

Germany aims to have 7 to 10 million EVs on the country's roads by 2030, and government-backed incentives of up to EUR 9000 are available to purchasers of new EVs and hybrids. That will open up business opportunities for German subsidiaries of foreign companies as well.

"By expanding to Germany, companies active in the value chain in this area can profit from this development and take part in a revolutionary change, influence things to come and position themselves advantageously for the mobility of the future," say Di Bitonto.

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