European Commission approves state aid for Northvolt battery plant in Germany

The European Commission (EC) has approved state aid of 902 million euros (around CZK 22 billion) that Germany plans to provide to Swedish company Northvolt to build an electric vehicle battery factory in the state of Schleswig-Holstein. The Commission announced the decision in a press release today.

According to EC Executive Vice-President Margrethe Vestager, the approved state aid „will enable Northvolt to invest in a gigafactory for electric vehicle battery cells in Europe rather than the United States“.

The measure includes direct financial support of 700 million euros and guarantees worth 202 million euros. „This German measure worth 902 million euros is the first individual aid approved with the aim of preventing an investment from moving outside Europe,“ Vestager said.

According to the EC, without the approved aid Northvolt would have built the factory in the United States, where the company had been offered support, particularly under the US Inflation Reduction Act (IRA). The law allows subsidies and tax breaks for the domestic production of a wide range of environmentally friendly products.

Northvolt plans to start production at the new factory near the town of Heide in 2026. The investment, worth 4.5 billion euros in total, was expected to create around 3,000 jobs, the DPA news agency reported.

Northvolt announced its decision to build a factory near Heide last May, after Germany pledged state aid. The company had already signed a preliminary agreement with the Schleswig-Holstein government to build a battery plant in March 2022. It later said, however, that more favourable subsidies and lower energy costs could lead it to prioritise expansion in the US over Europe.