The ambitious plans of the electric car manufacturer Tesla for the production of its own batteries in Germany are being put to the test because of possible massive tax breaks in the USA. The Wall Street Journal reported on Wednesday that Tesla had put its plan to produce its own batteries in the new Grünheide car factory near Berlin on hold for the time being.

Manufacturing more batteries in the US could help Tesla qualify for additional tax breaks from President Joe Biden’s Inflation Reduction Act (IRA). Tesla did not comment on this.

The Brandenburg Ministry of Economics continues to assume that Tesla will build the battery factory for its own cell production. The ministry received initial information on Thursday, said a spokeswoman.

“It seems possible that Tesla will reprioritize individual process steps in the plants, but that the Grünheide site will remain under construction and with its jobs.” She did not want to comment on the report.

In August, Congress in Washington passed a package of laws requiring billions to be invested in climate protection and the social sector. Among other things, it provides financial incentives for the construction of plants for electric cars, and energy research is to be promoted. The Brandenburg Economics Ministry called for a reaction from the EU because the US inflation reduction law would lead to a competitive disadvantage in Europe. “The EU must react here in terms of state aid in order to restore equality.”

The construction of the battery factory in Grünheide in Brandenburg is well advanced, but the timetable for the start of production is still unclear.

Tesla boss Elon Musk also wanted to make the plant near Berlin the world’s largest battery factory, as he said in November 2020. So far, the mass production of new types of battery cells with the production of dry electrodes is planned there, which should make do with significantly less space and energy consumption. The company has been producing electric cars in Grünheide since March of this year.

In 2021, Tesla surprisingly waived possible state subsidies in the billions for battery production. Certain conditions must be met for such funding. For example, the project must make an important contribution to EU research and climate policy.

US President Joe Biden signed the Inflation Reduction Act last month, which includes tax incentives worth billions for electric car manufacturers and manufacturers of batteries for electromobility. Electric vehicle buyers are still eligible for a $7,500 tax credit per purchase if the cars’ batteries meet certain criteria.

Today, the US plays a relatively small role in manufacturing the lithium-ion batteries that power electric cars and an even smaller role in the production of the raw and intermediate products that make up the battery cells.

According to market research firm Benchmark Mineral Intelligence, cited by The Wall Street Journal, China processes more than two-thirds of all the world’s nickel and cobalt deposits, while the US processes only 1 percent or less of each of these commodities.

The legislative package attempts to increase the US share in all key areas of electromobility. Washington is offering billions in tax incentives to automakers and battery companies if they shift their value chains to the US, reducing their dependence on China.

These incentives include a US$35 per kilowatt-hour (kWh) credit for US-made battery cells. The law also provides a $10 per kWh credit for domestically manufactured modules or battery cells, as well as additional support for companies that manufacture raw and intermediate EV battery products in the United States.

If all of these production credits were applied, the cost of a 75-kilowatt-hour battery pack, like the one used in the long-haul version of Tesla’s compact SUV, the Model Y, could drop by almost 40 percent, the Wall Street Journal quoted experts from as saying Bernstein Research. This is extremely attractive for battery manufacturers who are bringing their battery production to the USA.

Tesla has already discussed whether production machines for electric car batteries that were intended for Grünheide should be shipped to the USA instead. The WSJ relies on insider information.

With the newly built Tesla plants in Grünheide and in Austin, Texas, the electric car manufacturer wants to massively increase its quantities at some point. According to Tesla boss Elon Musk, they are currently “money-burning ovens”.

In the spring, the eccentric entrepreneur complained that you could almost hear the “gigantic noise, the sound of burning money”. “Berlin and Austin are losing billions of dollars right now because there’s a lot of spending and not much production.”

Tax breaks from the US government could come in handy, especially for the cost-conscious Musk.

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The original of this article “German Tesla battery plant on the brink?” comes from Deutsche Welle.