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Northvolt AB initiates construction of €5 billion battery plant in Northern Germany

Northvolt AB has embarked on the construction of a €5 billion ($5.4 billion) battery plant in northern Germany, marking a significant milestone in its endeavor to supply electric cars. This project marks the culmination of an intensive lobbying effort, facilitated by the newly relaxed European Union state aid rules.

The construction of the plant, located near the town of Heide, is bolstered by just over €900 million in subsidies and guarantees from Germany. This support played a crucial role in preventing the project from being relocated to the United States. Chancellor Olaf Scholz emphasized that the factory will contribute to securing the country’s future as a manufacturing hub.

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“The production of quality cars beyond the combustion engine remains the cornerstone of our industrial sector,” stated Chancellor Scholz during an opening ceremony on Monday. “For this, we require battery cells made in Germany, made in Europe.”

In a strategic move to enhance competitiveness against the US, the European Union relaxed its rules on state subsidies last year. This move aimed to attract investments by offering similar incentives to those in the US, where generous tax relief and aid for climate technologies are driving significant investments. Northvolt, Europe’s sole major home-grown EV battery manufacturer, counts Volkswagen AG and BMW AG among its clientele and is also advancing its presence with a site in Canada.

Northvolt’s Heide plant, powered by wind energy, is expected to employ approximately 3,000 individuals and commence operations in 2026. With an annual capacity target of 60 gigawatt-hours, making it Germany’s largest, the plant is poised to supply batteries for approximately 1 million electric vehicles. Initial construction estimates for the Heide facility were projected at €4.5 billion.

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