Northvolt chooses Germany over US for new EV battery plant with €902M aid

This week sees the European Commission approve a €902 million German state aid measure to retain Germany as the location of Northvolt's new EV battery manufacturing plant. 

In line with the Green Deal Industrial Plan, the Commission approved the aid under the State aid Temporary Crisis and Transition Framework.

Without the funds, Northvolt would establish its plant in the United States, with the backing offered through the Inflation Reduction Act.

But now the plant will be built in the City of Heide, a city in a disadvantaged area as defined under the German regional aid map, which will help stimulate the local economy, and help Germany and the wider EU reach net-zero targets. 

Northvolt expects the plant to have an annual capacity of 60 GWh. This translates to 800,000 to 1 million electric vehicles annually, depending on the battery size.

The plant will start producing in 2026 and reach full production capacity in 2029. 

Under the measure, the aid will consist of a €700 million direct grant and a €202 million guarantee. 

According to the Commission, the amount of aid is proportionate and limited to the minimum necessary to trigger the investment in Europe: it does not make the investment in Germany more profitable than the investment in the United States. It doesn't exceed the amount of the subsidy that Northvolt could demonstrably receive for the equivalent investment in the United States. 

Margrethe Vestager, Executive Vice-President in charge of competition policy stated: 

"This €902 million German measure is the first individual aid being approved to prevent an investment from being diverted away from Europe, under the new possibility offered by the Temporary Crisis and Transition Framework since March 2023. 

It enables Germany to support the construction of Northvolt’s production plant of batteries for electric vehicles. This is an important step for the electrification of transport in Europe while preserving the level playing field in the Single Market." 

Further, the measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to ensure the establishment of the battery production plant and it will not lead to overcapacity in the market. 

The aid will be granted by 31 December 2025. 

Lead image: Northvolt. Photo: uncredited.