Volkswagen’s CEO wrote that electric vehicle battery plants in the European Union are “practically unviable” at this moment due to soaring energy costs.
Further investment in key industrial projects such as battery cell plants in Germany and the EU are becoming more unfeasible due to policymakers inability to control skyrocketing long-term energy prices, according to the Chief Executive Officer for Volkswagen AG’s name brand, Thomas Schaefer.
Europe, and especially Germany, has been devastated by the loss of Russian energy exports to the bloc since the war in Ukraine and the Western sanctions on Moscow.
The EU, the UK, and the United States have all been facing a serious energy crisis for most of 2022.
Europe’s largest economy and the most dependent on Russian gas imports, Germany has seen its industrial output tumble due to high energy prices due to shortages.
Schafer warned that “the USA, Canada, China, Southeast Asia, and regions like North Africa are forging ahead.”
“Unless we manage to reduce energy prices in Germany and Europe quickly and reliably, investments in energy-intensive production or new battery cell factories in Germany and the EU will be practically unviable,” Schaefer posted on LinkedIn on Nov. 28.
“The value creation in this area will take place elsewhere.”
Schaefer praised the joint cooperative industrial policy effort between the French and German economics minsters, Bruno Le Maire and Robert Habeck last week, but said their plan “falls short in crucial areas and does not address the envisaged priorities.”
EU’s Economic Woes Compounded By Energy Costs, Changes to American Trade Policy
Europe’s economic crisis has also been compounded by the Biden administration’s Inflation Reduction Act, which was passed over the summer.
The new climate and tax law aims to boost domestic production of electric cars in the U.S. and reduce reliance on foreign countries like China for battery components and materials.
European Union officials complained that the subsidies and restrictions also hurts European companies and violates World Trade Organization rules by discriminating against non-American companies.
The economic ministers of France and Germany both are opposed to Biden’s economic agenda and view them as partially reversing decades of previous trade policies with its allies.
Le Maire compared the Amer ican industrial policy similar to that of communist China’s, whose government offers major subsidies to local companies to boost domestic production.
“China tipped into this globalization a long time ago with massive state aid exclusively reserved for Chinese products. Right before our eyes, the U.S. has tipped into this new globalization to develop its industrial capacity on US soil,” Le Maire said.