US and Europe fight for electric vehicles

Europe and the United States want more of the electric vehicle supply chain at home. Car factories, battery plans and refineries create jobs and useful know-how that countries want for themselves. Factories at home are also less likely to get caught up in trade wars.

But there’s a finite number of car factories, battery plants and refineries. Everyone wants them. Not everyone can have them.

To encourage manufacturers to choose Alabama over Aalborg, the US is giving lots of money to companies who build electric vehicle factories. It’s working!

From a FT story about how Volkswagen is prioritising a new EV factory in the US:

Another executive said: “We’ve been contacted by many US states and they all highlight the IRA. When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe.”
VW said no decisions had been made on the locations of its plants in North America or Europe and it was committed to its plan to build more cell factories in Europe. “But for this we need the right framework conditions.

“Right framework conditions” is a fun way to say “more money please”

Industrial policy like this is full of clever rules to force companies to use subsidies wisely instead of growing fat and slow on the government teat: Half the money upfront, half on completion; government share in the profits; more money if the company exports lots and proves to be internationally competitive. There might also be rules so companies who take subsidies commit to government priorities, say paying workers fairly or offering child care.

But there’s only so many factories! Will competition cause governments to lower standards? A race to the bottom on industrial policy? At the very least governments are likely to pay up. Let’s see how many framework conditions the EU offers.

And in Europe…

Its been a big news week in Europe.

The entire Dutch cabinet has resigned following a scandal where the tax authorities unfairly targeted minorities with demands to repay childcare benefits. This, in one of Europe’s biggest corporate tax havens. The government was already in caretaker mode thanks to elections in March, which Prime Minister Mark Rutte’s party is still expected to win.

Because its the Netherlands, he rode his bicycle over to see the King and hand in his resignation.

Elsewhere, Angela Merkel’s 16 year reign is coming to an end. She will not be contesting the coming elections in October, and her party has just selected its new leader, a candidate who promises to continue her centrist legacy.