Tesla is suspending plans to make battery cells in Germany as it looks to qualify for battery and electric vehicle (EV) manufacturing tax breaks in the United States (US), the Wall Street Journal reported on Wednesday. In March, Tesla had announced the opening of its first European Gigafactory located near Berlin, Germany.
According to the report, the electric vehicle maker has discussed moving equipment used to make cells to the United States, initially intended for use in the German factory.
The Inflation Reduction Act, which US President Joe Biden signed last month, allows EV makers to source batteries from within the US with tax breaks. The law also allows some buyers a $7,500 tax credit if they buy EVs whose batteries meet specific sourcing requirements.
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The company is looking to boost the production of its electric vehicles at its new factories in Germany’s Berlin and Austin, Texas, to meet rising demand. The company also told Texas officials that it was scouting regional sites for a plant that would refine lithium, a key battery input that today is primarily processed in China.
The Russian invasion of Ukraine has affected the manufacturing sector by soaring energy costs in Europe. The geopolitical tension has also caused the prices of materials used in batteries to rise.
Sham Kunjur, General Motors’ executive director for EV raw materials, said discussions with outside companies to build a US battery supply chain have heated up since the law took effect.