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France rolls out red carpet for battery plants

Tan KW
Publish date: Tue, 06 Jun 2023, 10:18 AM
Tan KW
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PARIS: For French President Emmanuel Macron, it was a lightbulb moment.

In an ornate ballroom at the Palace of Versailles last July, the head of Taiwan’s ProLogium took out a pair of scissors and cut one of its solid-state batteries, the size of a credit card, in half. The small bulb it was powering continued to shine.

Macron was amazed by the demonstration of the safety and durability of the next-generation technology many carmakers hope will soon power electric vehicles (EVs), according to two people at the meeting.

“We’ll make your life easier and help you set up shop here,” he told ProLogium’s chief executive Vincent Yang.

Ten months later, Macron and Yang stood side-by-side in Dunkirk to announce that ProLogium had picked the northern French port ahead of sites in Germany and the Netherlands for its first EV battery gigafactory outside Taiwan.

It is one of four such gigafactories Macron hopes will transform the poor, former coal mining area near Belgium into a hub for the EV battery industry, creating jobs and helping to put France at the forefront of Europe’s energy transition.

It didn’t happen by chance.

Interviews with 10 government officials and executives involved in the investment decisions show that France rolled out the red carpet, offering battery makers generous subsidies thanks to a relaxation of European Union state aid rules for green energy projects, along with some personal lobbying by Macron.

The people said changes since Macron became president in 2017, such as cuts in corporate tax, measures to make hiring and firing easier, and reductions in a production tax based on the size of factories, also played a role in the decisions.

Besides ProLogium, China’s Envision AESC, local startup Verkor and the ACC consortium, including Mercedes and Stellantis, are setting up gigafactories in the same area, and officials said France is courting Chinese EV giant BYD, and Tesla to build car plants too.

“Results don’t just fall from the sky,” Macron told Reuters in Dunkirk. “It’s in line with what we’ve been doing for six years. France is adapting to the world.”

Automakers are racing to stay ahead of rivals by producing cleaner vehicles, securing greater control over their supply chains and bringing plants making EV batteries, an industry dominated by Chinese, South Korean and Japanese firms, closer to their manufacturing sites.

At the same time, European governments have been fretting that the US$430bil US Inflation Reduction Act (IRA), which includes big tax subsidies to cut emissions while boosting domestic manufacturing, would divert investment to the United States at Europe’s expense.

That’s why France is presenting the conversion of its once-industrialised north into a gigafactory hub as a victory for European economic and manufacturing sovereignty in the face of stiff US and Chinese competition.

But Macron’s activism also highlights the growing rivalry between European governments to land high-profile investments from car companies and their suppliers.

“The president fights for Europe whenever possible. But it’s also a race within Europe,” said a French diplomat familiar with Macron’s thinking who declined to be named.

With the ProLogium deal and the inauguration of Automotive Cells Company’s (ACC) plant last month, Macron also hopes to show a disgruntled public that his business-friendly reforms are paying off and shift the narrative away from months of protests over his decision to raise the retirement age.

At the moment, however, France lags well behind Germany when it comes to attracting battery makers.

Including ProLogium’s 48 gigawatt-hour (GWh) plant, it has 169 GWh of planned or existing sites, way short of Germany’s 545 GWh and Hungary’s 215 GWh, according to a snapshot of projects co-authored by Heiner Heimes, an academic specialising in battery production at RWTH Aachen University in Germany.

But France is catching up, partly thanks to its largesse in funding projects upfront.

To bag the ProLogium solid-state battery plant, which is expected to involve a total investment of €5.2bil and create 3,000 jobs over time, France offered incentives worth more than €1bil (US$1.1bil or RM4.9bil), one source with knowledge of the deal told Reuters.

French officials and ProLogium executives declined to comment on the level of support as it is still pending European Commission approval and the final amount could differ.

For the €2.3bil plant opened by ACC, the battery manufacturer involving Franco-Italian carmaker Stellantis, German rival Mercedes and French energy company TotalEnergies, France provided about €840mil in subsidies, including funds for research and development, according to the finance ministry.

ACC plans to build two similar plants in Germany and Italy with the help of €437mil and €370mil in public funds, respectively, according to the German and Italian governments.

Ola Kaellenius, chief executive of Mercedes-Benz Group, said it was taking a region-by-region approach to ensure EV batteries were made near its auto manufacturing plants around the world - so having gigafactories in Europe was inevitable.

“Now that you have additional economic incentives on top of that, it is something you have to take into your business case calculation, there is no doubt about that,” he told Reuters.

To roll out the public support France is using to entice battery makers, Macron lobbied Brussels to let EU member states match the kind of subsidies Washington is throwing at the EV industry under the IRA.

The EU agreed in February to loosen state aid rules, paving the way for France to unveil a green tax credit package that can be worth up to 40% of a company’s capital investment in wind, solar, heat pump, and battery projects.

“The usual level of support for major industrial companies is around 10 to 15%. Here, it’s higher than usual,” said Marc Mortureux, the head of the PFA French car lobby. “We’re now at support levels in line with those of the US’ IRA.”

 - Reuters

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