Tesla, BMW approved for slice of US$3.5b EU battery aid

[BRUSSELS] The European Union paved the way for companies including Tesla and BMW to get about US$3.5 billion of state aid for battery projects that will strengthen the bloc's position in the race to produce more electric vehicles.

The European Commission expects the support to trigger more than three times as much private investment, bringing the total spent to about 12 billion euros (S$19.3 billion). The aid will go to 42 companies across a dozen countries, with beneficiaries also including Fiat Chrysler owner Stellantis and startup Northvolt.

The 27-nation bloc plans to slash greenhouse gas emissions from transport under the European Green Deal, an ambitious economic overhaul aimed at reaching climate neutrality by 2050. Along the way, the EU wants to reduce its reliance on EV batteries from Asian producers. The value of Europe's battery market will reach 250 billion euros by 2025 and meet demands from the auto industry, according to the commission.

"Europe will cement in this way its position as a global hot spot for battery investment," European Commission Vice President Maros Sefcovic said. "This pan-European project will help revolutionise the battery market." More information about the amount of aid going to each project will be available in the public version of the Commission's decision once it has agreed with member states and third parties on any confidential business secrets that need to be removed.

Aid for the projects, which are expected to be completed by 2028, will be disbursed by countries including Finland, Spain, France and Poland, and was coordinated by Germany. It follows a 3.2 billion-euro package to support a total of 9 billion euros of public and private spending that was coordinated by France and approved in December 2019.

Battery investment has poured in as Europe's stricter pollution standards forces carmakers to embrace electric cars and limit carbon-dioxide emissions. BloombergNEF is forecasting 1.9 million sales of plug-in hybrid and battery-electric vehicles in Europe this year, topping China and almost quadrupling the total expected in North America.

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As part of the Green Deal, the EU wants to toughen its 2030 emissions-reduction target to at least 55 per cent from 1990 levels, compared with the existing goal of a 40 per cent cut. The overhaul is a key pillar of the region's strategy to recover from the virus-induced recession.

European policy makers are aware the bloc's key industries risk falling behind if they don't fill manufacturing gaps in energy-storage technology. Lithium-ion batteries will power plug-in cars and also help balance electric grids transmitting renewable energy including wind and solar.

The battery initiative announced Tuesday got priority status as an Important Project of Common European Interest, or IPCEI. It will involve research and development of new technologies to reduce or completely eliminate cobalt or natural graphite and replace it with synthetics.

The projects will cover the entire battery value chain, from extraction of raw materials, design and manufacturing of battery cells and packs, and recycling and disposal. The aid is expected to contribute to development of technological breakthroughs, including different cell chemistries, novel production processes and other innovations.

BLOOMBERG