Macron can crush the Hungarian government’s battery industry dreams

RockedBuzz
By RockedBuzz 6 Min Read

A battery manufacturing gigafactory was inaugurated last Thursday in the northern region of France, the first of four plants planned for the region. The gigafactory developed by the joint venture of the Automotive Cells Company (ACC), Stellantis, Mercedes and TotalEnergies represents a total investment of 2 billion euros (HUF 740 billion), almost half of which is provided by the French state and local governments, Reuters reported.

This initiative reflects the competition between European governments to attract global automakers and bring electric vehicle parts supply closer to key markets. Taiwan’s ProLogium, China’s Envision AESC and Renault in partnership with Verkor are also planning gigafactories in the same region.

France would rather build a partnership with European manufacturers, the Chinese Envision also only became a partner in Renault’s project, it will not be the sole owner of the plant under construction since 2021. This is contrary to the Hungarian model, in which non-EU manufacturers – such as the Chinese CATL or EVE, the South Korean Samsung SDI and SK On – develop independently.

For all of this, the French battery industry can be a serious challenger to Hungarian manufacturers.

The wallet of Paris has been opened

ACC’s gigafactory will begin production of lithium-ion batteries later this year, with an initial capacity of 13 gigawatt hours (GWh) and eventually expand to 40 GWh, enough to fit around 500,000 cars a year. The project is expected to create up to 2,000 jobs by 2030, according to the statement of the companies and regional authorities, reported the Reuters.

Europe’s heavy reliance on Asian-made batteries for electric vehicles has prompted national leaders to provide incentives to start a domestic battery industry. The issue has become more pressing after the United States ramped up competition with the Anti-Inflation Act, which includes significant tax subsidies to reduce carbon emissions and boost domestic production.

French President Emmanuel Macron has set the goal of producing 2 million electric vehicles in France by 2030, and he has personally advocated securing gigafactories in the Dunkirk region.

The French head of state actively supports France as a center for the production of batteries for electric vehicles. Following Macron’s efforts, several large battery manufacturers have chosen France as the location for their gigafactories. The country has offered generous subsidies and eased EU state aid rules for green energy projects to attract battery makers. Changes made since Macron was elected president, such as corporate tax cuts and labor market reforms, have also played a role. The program is so successful that the Chinese electric car giant BYD and Tesla are also interested in the French opportunities.

France’s aspiration to become the center of a gigafactory is driven by the desire to remain at the forefront of the EV industry and to maintain European economic and manufacturing sovereignty against American and Chinese competition.

Moreover, Macron is not competing with Hungary, but with Germany, as it still lags behind the latter in attracting battery manufacturers. Paris has therefore stepped up its efforts by offering significant pre-financing for the projects: for example, it has provided more than €1 billion in incentives to ProLogium’s solid-state battery factory and around €840 million to ACC’s gigafactory.

This degree of support intensity can cause a serious headache for Hungary, as it is easier to provide such giga-subsidies due to the size of the French economy. At home, the construction of the CATL factory received a record state incentive of nearly 800 million euros, while the expansion of Samsung SDI received only 89.6 million euros.

France also suppresses the USA

To support the battery industry, France has lobbied the EU to loosen state aid rules, allowing member states to help investment with incentives similar to the U.S. Anti-Inflation Act. The EU agreed, allowing France to introduce a green tax credit package.

State aid to battery manufacturers in France has now reached US levels.

The French government has also simplified the approval process for projects and introduced cash incentives for buyers of electric cars, but with conditions favoring low-carbon standards.

Although Macron’s efforts have attracted investment, some opposition politicians are skeptical, fearing that France is becoming too dependent on subsidies and vulnerable to the whims of corporations playing off governments against each other. Despite the criticism, French officials argue that the gigafactories demonstrate the success of the government’s supply-side reforms and reverse the trend of shifting manufacturing to lower-cost sites.

Cover image: Getty Images.

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