It was an epiphany for French President Emmanuel Macron.
The leader of Taiwan’s ProLogium pulled out a pair of scissors in a lavish ballroom at the Palace of Versailles in July and divided a credit card-sized solid-state battery in half. It kept illuminating the tiny light bulb it was powering.
According to two attendees, Macron was astounded by the demonstration of the reliability and safety of the next-generation technology that many automakers expect will soon power electric vehicles (EVs). He promised Vincent Yang, CEO of ProLogium, “We’ll make your life easier and help you set up shop here.”
Ten months later, Macron and Yang appeared side by side in Dunkirk to declare that ProLogium had chosen the port for its first EV battery gigafactory outside Taiwan over locations in Germany and the Netherlands.
One of four such gigafactories, it will help turn the impoverished, former coal mining region near Belgium into a center for the EV battery sector, generating jobs and elevating France to the forefront of Europe’s energy transformation.
It didn’t just happen that way.
10 government officials and businesspeople who were involved in the investment choices were interviewed. The results revealed that France threw out the red carpet for the battery industry, providing large subsidies thanks to a relaxation of EU state aid regulations for renewable energy projects and some personal lobbying by Macron.
People said that adjustments made after Macron took office in 2017—including reductions in corporation tax, steps to make hiring and firing simpler, and a production tax based on the size of factories—also had an impact on the decisions.
Along with ProLogium, the ACC consortium, which includes Mercedes and Stellantis, local startup Verkor, and China’s Envision AESC is also building gigafactories in the same region. According to officials, France is also courting the Chinese EV giants BYD and Tesla to build auto plants.
In Dunkirk, Macron told reporters that “results don’t just fall from the sky.” It follows the course of our six-year practice. The world is changing as France does.
“RACE IN EUROPE”
Automakers are competing to remain ahead of rivals by creating cleaner automobiles, gaining more control over their supply chains, and locating EV battery production facilities closer to their manufacturing sites. The industry is dominated by Chinese, South Korean, and Japanese companies.
The $430 billion U.S. Inflation Reduction Act (IRA), which includes significant tax subsidies to reduce emissions while increasing local manufacturing, has caused concern among European countries that it may cause a shift in investment away from Europe and toward the United States.
France is portraying the metamorphosis of its formerly industrialized north into a hub for gigafactories as a success for European economic and manufacturing sovereignty against fierce competition from the United States and China.
Macron’s advocacy, though, also draws attention to the growing competition between European governments for prominent investments from automakers and their suppliers.
“Whenever he can, the president defends Europe. But there is also a race going on within Europe,” a French diplomat who was aware of Macron’s views but who wished to remain anonymous said.
With the ProLogium agreement and the opening of ACC’s plant last month, Macron also hoped to reassure an unsatisfied public that his pro-business changes were successful and divert attention from the months-long demonstrations over his decision to raise the retirement age.
However, France is currently far behind Germany in terms of luring battery manufacturers.
According to a snapshot of projects co-authored by Heiner Heimes, a professor specializing in battery production at RWTH Aachen University in Germany, it has 169 GWh of planned or existing sites, far behind Germany with 545 GWh and Hungary with 215 GWh.
EXERCISING CATCH-UP
However, France is coming up, in part because of its generous upfront funding of projects.
According to a person with knowledge of the project, France provided incentives worth more than 1 billion euros ($1.1 billion) to secure the ProLogium solid-state battery plant, which is anticipated to require a total investment of 5.2 billion euros and generate 3,000 jobs over time.
French officials and ProLogium executives declined to comment on the level of funding since the final sum may differ and because it is still awaiting European Commission clearance.
France provided about 840 million euros in subsidies, including money for research and development, for the 2.3 billion euro plant opened by ACC (Automotive Cells Company), the battery manufacturer that includes the German competitor Mercedes, the French energy company TotalEnergies, and the Franco-Italian carmaker Stellantis.
According to the German and Italian governments, ACC intends to construct two identical plants in Germany and Italy using 437 million euros and 370 million euros in public funding, respectively.
Ola Kaellenius, CEO of the Mercedes-Benz Group, stated that gigafactories in Europe were unavoidable since the company was following a region-by-region approach to ensure that EV batteries were manufactured close to its auto manufacturing units across the world.
There is no question that you must include it in your business case assessment now that there are additional economic incentives on top of that, he told reporters.
Macron persuaded Brussels to allow EU member states to match the kind of subsidies Washington is pouring into the EV industry under the IRA in order to roll out the public assistance France is employing to entice battery companies.
The EU decided to relax state aid regulations in February, which allowed France to introduce a green tax credit package that could account for up to 40% of a company’s capital expenditure in projects involving wind, solar, heat pumps, and batteries.
“About 10% to 15% of major industrial businesses often receive funding. It’s higher than usual here, according to Marc Mortureux, president of the PFA French Automobile lobby. We have reached support levels that are comparable to those of the US IRA.
“AN ADORABLE GUY”
The region where the battery hub is located may expedite projects in less than half the time it takes other French regions since all essential permissions are completed concurrently rather than sequentially, according to Xavier Bertrand, the region’s chief.
France is also making a monetary incentive of up to 5,000 euros for purchasers of new electric cars conditional on the manufacturers meeting strict low-carbon standards, thereby excluding many non-European automakers using dirtier fuel.
However, a French presidential adviser told reporters that the IRA nearly derailed ProLogium’s investment in France.
ProLogium stated that it required a “little extra” to persuade its board to invest in France, prompting Macron’s advisors and the company to hold a crucial meeting in Paris in April of this year.
The advisor claims that Macron’s assurance that he would personally attend the signing ceremony and provide ProLogium a much-needed media boost sealed the deal.
When asked about the French version of events, ProLogium’s Yang told reporters that Macron is a nice guy. The adjacent Gravelines nuclear power plant’s inexpensive electricity, he continued, was just as significant, if not more so.
French officials claim that as a result of the government’s supply-side policies, the country is beginning to open factories on its territory after two decades of offshoring to less expensive locations. They cite the gigafactories as one example.
However, some opposition politicians claim that Macron is only exposing France to the whims of businesses that manipulate governments to gain access to more public funds.
According to Fabien Roussel, leader of the French Communist Party, Dunkirk has Chinese and Taiwanese investments. These stockholders have a variety of options for leaving. What occurs if the government does not provide assurances or has a stake in the company?
