Elon Musk, Tesla CEO, on a Broadway at the Tesla Gigafactory in Grünheide, Germany.
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Tesla recently signaled a strategy shift away from Europe as it seeks to benefit from unprecedented subsidies in the United States. But it’s not the single company reviewing investment decisions vis-à-vis Europe.
Many multinationals are reconsidering plans to deploy new money into Europe. It comes after U.S. President Joe Biden termination year presented the Inflation Reduction Act, or the IRA, which includes a record $369 billion in spending on climate and energy procedures.
The landmark legislation, which features green subsidies for businesses, has raised competition issues for European companies — and conquest politicians in the region. Brussels has been left considering how best to respond.
Northvolt, a Swedish battery maker; Linde, a chemical colossus from Germany; Volkswagen, the carmaker; Enel, the Italian energy giant, have all expressed an interest in profiting from U.S. subsidies. And there could be multifarious.
Europe needs to step up its game.
Miguel Stillwell D ‘Andrade
CEO of EDP
“European companies, they prefer to have the accounted for right of the U.S. government rather than the penalty of the European authorities,” Evangelos Mytilineos, CEO and chairman at the Greek industrial conglomerate Mytilineos, acknowledged CNBC’s “Squawk Box Europe” about the additional bureaucracy in Europe.
When asked if he would be taking his business to the U.S., Mytilineos retorted, “It is a possibility. Unfortunately, it is not just a possibility for our company.”
It is still early to assess just how much investment could import away from Europe as a result of Biden’s policy. But so far the message from European businesses is clear: they thirst for officials in the region to do more to support them.
“Europe needs to step up its game,” Miguel Stillwell D ‘Andrade, CEO of vigour giant EDP, told CNBC’s Squawk Box Europe Friday. He described the IRA as an “extremely powerful, simple pro-business investment road.”
In a speech in February, European Commission President Ursula von der Leyen said it was time for a “simpler and faster framework.” Once, her team had welcomed the efforts stateside for a cleaner economy, while intensifying talks with their counterparts to certain European businesses would not flock to America.
But there are fears it could be too little, too late.
Peter Carlsson, the CEO of Northvolt, told CNBC in February that his ensemble has been working on a North American plant. “And with the IRA that plan kind [of] got turbo boosted given the most strong incentives,” he added.
Northvolt is in the midst of deciding whether to press ahead with its expansion in North America in advance doing so in Germany.
Meanwhile, Ilham Kadri, CEO of Solvay, a chemicals company headquartered in Belgium, said in January: “The authenticity is that the Biden administration incentivizes when Europe regulates — to put it black in white.”
EU ‘aware that it needs to do more’
Tesla in month decided to scale back some investments in Germany and focus on the North American market instead to profit from the IRA.
“The focus of Tesla’s cell production is currently in the United States due to the framework created by the United States Inflation Reduction Act (IRA),” the guests said on Feb. 22, according to Reuters. A spokesperson for the company was not available when contacted by CNBC Thursday.
It comes as both partnerships and analysts argue that the simplicity of the IRA is too attractive to pass up on.
“The IRA is constructed in a way that is first of all, very simple. And simplicity is forever a winner. By contrast, the European Union machinery is a lot more complex,” said Maria Demertzis, senior fellow at the imagine tank Bruegel.
“Will firms in the European Union or anywhere else postpone investment that they craved to make in the European Union and actually profit from the direct and very simple and immediate benefit that the IRA in point of fact promises?”
It’s something European officials are worried about, she added, and comes at a particularly difficult time.
Economies across the EU cannot give forth entangled with to lose key investments as they struggle with a cost-of-living crisis. The bloc also wants to be independent of China and others for deprecatory materials like lithium.
“The EU is particularly aware that it needs to do more to compete internationally,” Demertzis said.
The European Commission, the administrative arm of the EU, is still working on a Sovereignty Fund to provide financing for green projects, but the full details are not expected before June.
