Elon Musk, CEO of Tesla, on stage at Tesla’s Gigafactory in Grünheide, Germany.
Image Alliance | Image Alliance | Getty’s paintings
Tesla recently announced a change of strategy away from Europe because it looks to make the most of unprecedented subsidies in america. But it surely will not be the one company that verifies investment decisions towards Europe.
Many multinationals are reconsidering plans to introduce latest money to Europe. It comes after U.S. President Joe Biden introduced the Inflation Reduction Act, or IRA, last yr, which incorporates a record $369 billion in spending on climate and energy policies.
The landmark laws, which incorporates green subsidies for corporations, has raised competition issues for European corporations and upset politicians in the region. Brussels is pondering how best to reply.
Northvolt, a Swedish battery manufacturer; Linde, chemical giant from Germany; Volkswagen, automobile manufacturer; enel, the Italian energy giant, have all expressed interest in benefiting from US subsidies. And there could also be more.
“European corporations prefer a present from the US government to punishment from European authorities,” Evangelos Mytilineos, CEO and chairman of Greek industrial conglomerate Mytilineos, told CNBC’s Squawk Box Europe concerning the extra bureaucracy in Europe. .
When asked if he would relocate his company to america, Mytilineos replied: “There’s a possibility. Unfortunately, this will not be just a possibility for our company.”
It is just too early to evaluate how much investment may flow out of Europe consequently of Biden’s policies. But up to now, the message from European corporations is obvious: they need officials in the region to do more to support them.
![Europe lags behind the US in encouraging companies to become more sustainable: Evangelos Mytilineos](https://image.cnbcfm.com/api/v1/image/107200742-16775812651677581262-28380240783-1080pnbcnews.jpg?v=1677586906&w=750&h=422&vtcrop=y)
In a speech in February, European Commission President Ursula von der Leyen said it was time for a “simpler and faster framework”. Previously, her team welcomed US efforts towards a cleaner economy, while stepping up talks with their counterparts to make sure European corporations didn’t congregate in America.
Nevertheless, there are concerns that it could be too little, too late.
Peter Carlsson, Northvolt’s CEO, told CNBC in February that his company was working on a plant in North America. “And with the IRA, this type of plan [of] has been turbocharged given the very strong incentives,” he added.
Northvolt is in the means of deciding whether to proceed expanding in North America before doing so in Germany.
Meanwhile, Ilham Kadri, CEO of Solvay, a Belgian chemical company, said in January: “The truth is that the Biden administration encourages when Europe regulates – to place things in black and white.”
EU ‘aware it must do more’
Tesla last month decided to in the reduction of on some investments in Germany and as an alternative deal with the North American market to make the most of the IRA.
“Tesla’s cell production is currently concentrated in america on account of the framework created by the US Inflation Reduction Act (IRA),” the corporate reported on February 22, in response to Reuters. A spokesperson for the corporate was not available when contacted by CNBC on Thursday.
It comes as each corporations and analysts say the simplicity of the IRA is just too attractive to pass up.
“The IRA is structured in a way that could be very easy in the primary place. And ease all the time wins. The mechanism of the European Union, however, is rather more complex,” said Maria Demertzis, a senior fellow on the Bruegel think tank.
![Solvay CEO: Europe must be inspired by Biden's IRA regulations](https://image.cnbcfm.com/api/v1/image/107180510-16740669871674066984-27783945251-1080pnbcnews.jpg?v=1674067229&w=750&h=422&vtcrop=y)
“Are corporations in the European Union or anywhere else laying aside the investments they desired to make in the European Union and actually benefiting from the direct and quite simple and immediate advantages that the IRA actually guarantees?”
That is something that European officials are concerned about, she added, and it comes at a very difficult time.
Economies across the EU cannot afford to lose key investments in the face of a cost-of-living crisis. The bloc also desires to be independent of China and others for critical materials similar to lithium.
“The EU is especially aware that it must do more to compete internationally,” said Demertzis.
The European Commission, the EU’s executive arm, remains to be working on a Sovereign Fund to offer funding for green projects, but full details are usually not expected until June.
![Northvolt CEO: Still involved in the German plant](https://image.cnbcfm.com/api/v1/image/107197950-1677056228359-1677055379803-Northvolt210223clip2v1.jpg?v=1677056255&w=750&h=422&vtcrop=y)