For a long time, it seemed unclear whether the billion-dollar battery cell factory of the Swedish manufacturer Northvolt would really be built in northern Germany. Due to high subsidies for such plants in North America and the expensive electricity in Germany, Northvolt considered investing on the other side of the Atlantic – and putting the factory plans in Heide in Schleswig-Holstein on the back burner.

Marcus Theurer

Editor in the economy of the Frankfurter Allgemeine Sonntagszeitung.

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But now there are signs of a turnaround: Northvolt can now imagine building two factories in parallel due to the high demand for battery cells for the automotive industry: one in North America and one in Heide. His company has now decided to "take the next steps for the expansion in Heide," said Northvolt CEO Peter Carlsson on Friday. The factory is to supply electricity storage for VW and BMW.

The fact that the factory's chances of realisation have increased is largely due to the fact that Germany is now holding out the prospect of higher state subsidies. The federal government and the state government in Schleswig-Holstein are ready to financially support the planned "gigafactory" for electricity storage, Federal Minister of Economics Robert Habeck announced on Friday.

The Green politician described the factory as "one of the most important lighthouse projects of the energy and transport transition." However, the EU Commission still has to approve the planned state aid for Northvolt.

Northvolt announced the construction of the €4.5 billion battery cell factory in Schleswig-Holstein in March 2022. The plant was scheduled to go into operation in 2025, it was said at the time. Now there is talk of a possible start of production in 2026. The region is hoping for 3000,<> new jobs. The plant is expected to supply battery cells for around one million electric vehicles per year.

The world market leader comes from China

In October, company boss Carlsson had put a question mark behind the billion-dollar investment in an interview with the F.A.S.: "We are now at a point where we may initially give priority to expansion in the USA over Europe," the Swede said at the time.

In addition to the high subsidies in North America promised by Joe Biden's Inflation Reduction Act, he cited the high energy prices in Germany as the reason: "With the current electricity prices, we see the profitability of energy-intensive projects in Germany at risk," warned the Northvolt boss.

In recent months, there have been intensive negotiations between German politicians and Northvolt about more financial support for the project. In the Federal Chancellery, a separate "Northvolt task force" has been formed for this purpose, according to sources close to the talks.

Meanwhile, a site in Quebec, Canada, is considered a candidate for the construction of a Northvolt plant in North America. This was recently reported by the American media. VW has also announced the construction of a battery cell factory in Canada. Because of a free trade agreement, companies there can also benefit from US subsidies.

Northvolt is regarded as a leading company in the race to catch up with European industry in strategically important battery cell production. So far, however, European car manufacturers have been almost completely dependent on suppliers from Asia.

The clear world market leader is the Chinese company CATL. Northvolt was founded in 2017, and investors include VW and BMW. At the end of 2020, the company opened the first battery cell factory of a European company in northern Sweden.