In January of this year, the German government announced the Important Projects of Common European Interest program designed to bring more battery factories to Europe. There is great concern in certain circles that Chinese owned companies will dominate worldwide battery manufacturing and that is not in the best interest of the countries that comprise the European Union.
Under the program, Tesla would be eligible for a subsidy of 1.14 billion euros ($1.28 billion) to help build the battery factory it plans to construct adjacent to its new production facility in Grünheide. According to Reuters, the company notified the German government last week that is has withdrawn is application for the money. “Tesla has informed the Federal Ministry of Economics and the Brandenburg Ministry of Economics … it is withdrawing its IPCEI application for state funding for the battery factory in Grünheide,” a spokesperson told the media, adding that the lack of subsidy money would not keep the battery factory from being built. Tesla is planning to invest $5 billion of its own money in that factory.
On Twitter, the new lingua franca of the digital age, Musk adopted a somewhat haughty attitude about the subsidy. “It has always been Tesla’s view that all subsidies should be eliminated. But that must include the massive subsidies for oil & gas. For some reason, governments don’t want to do that…,” Musk said.
There may be more to the story, however. Tesla got a package of incentives and tax breaks worth $1.3 billion over 20 years from the state of Nevada to build its Gigafactory near Reno. It has never been shy about accepting money other manufacturers pay for zero emissions credits. In fact, without those funds, the company may not have survived long enough to be the industrial juggernaut it has become. Travis County in Texas approved a package of tax breaks worth $14.7 million in order to lure Tesla to build its Austin Gigafactory there.
It also applied in last November for regional funding from the state of Brandenburg. A spokesperson for its ministry of economics tells CNBC that application has not been withdrawn. The amount Tesla applied for is undisclosed, but investments worth over 100 million euros are generally awarded financial incentives equal to 6.8% of their value. So Musk’s blanket condemnation of all subsidies sounds a bit disingenuous, and that’s being kind.
Page Two: The Rest Of The Story
There may be more going on here than meets the eye. Virtually every news source is reporting that Tesla unilaterally decided to withdraw its petition for assistance to build its battery factory, but a story in Automotive News Europe adds some context to the saga. It claims Tesla’s recent decision to build its 4680 format battery cells in Austin makes it ineligible for the German subsidy.
“[Tesla] has been working on so-called 4680 battery cells at a site near its car plant in Fremont, California,” ANE reports. “CEO Elon Musk said last year that after the company proved it could make them on a pilot assembly line there, it would manufacture them at scale at the factory it has been constructing outside Berlin.
“This made Tesla eligible to receive public funds from Germany as part of the European Union’s Important Project of Common European Interest (IPCEI) initiative, which backs first industrial deployments of battery projects in member states. Now that Tesla has shifted gears and is further along producing 4680 cells at its factory under construction in Austin, Texas, it is no longer eligible for the money, according to the person, who asked not to be identified discussing private information.”
“Curiouser and curiouser,” said Alice. The redoubtable Mr. Musk has been feuding with Senator Bernie Sanders lately. The spat centers on Sanders’ suggestion that wealthy people should pay taxes on the increased value of their stock portfolio. It’s fair to say that Musk has been the beneficiary of rather a lot of increased value since shares of Tesla passed $1000 lately and are continuing their upward climb.
Musk has also been publicly chiding German officials about the welter of laws and regulations he says are slowing him down in his quest to transition the world to zero-emissions transportation. The line between genius and insanity depends on how many zeroes are in a person’s bank account, and Musk has more of them than any person in history. Which may explain why he sometimes goes charging off to tilt at windmills.
The takeaway probably is not about a German battery factory subsidy but rather that Tesla will soon be putting its 4680 cells into production in Austin and Grūnheide. The rest of the automobile industry may want to have a think about what that means for them and their own electric car plans.
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