Tesla recently announced a strategy shift away from Europe as it seeks to benefit from unprecedented subsidies in the United States. But it’s not the only 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 last year presented the Inflation Reduction Act, or the IRA, which includes a record $369 billion in spending on climate and energy policies.
The landmark legislation, which features green subsidies for businesses, has raised competition issues for European companies — and upset politicians in the region. Brussels has been left considering how best to respond.
Northvolt, a Swedish battery maker; Linde, a chemical giant 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 more.
Europe needs to step-up its game.
Miguel Stillwell D ’Andrade CEO OF EDP
“Europe needs to step up its game,” Miguel Stillwell D ’Andrade, CEO of energy giant EDP, told CNBC’s Squawk Box Europe Friday. He described the IRA as an “extremely powerful, simple pro-business investment tool.”
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 had welcomed the efforts stateside for a cleaner economy, while intensifying talks with their counterparts to ensure 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 company has been working on a North American plant. “And with the IRA that plan kind [of] got turbo boosted given the very strong incentives,” he added.
EU ‘aware that it needs to do more’
Tesla last month decided to scale back some investments in Germany and focus on the North American market instead to benefit 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 company said on Feb. 22, according to Reuters. A spokesperson for the company was not available when contacted by CNBC Thursday.
It comes as both businesses and analysts argue that the simplicity of the IRA is too attractive to pass up on.
The European Commission, the executive 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.
