U.S. attracts European clean tech companies offshoring

Inflation Reduction Act (IRA) is attracting European companies to invest in green energy in the United States. The law is to boost the U.S. transition towards clean energy away from fossil fuels.

U.S. IRA is providing huge incentives to companies seeking to invest in the green energy sector. Companies executives are applauding the simplicity of U.S. incentives programme.

Thomas Schmall, Volkswagen’s board member compared the situation in U.S. with it in Europe. He also warned IRA incentives might cause Europe to “lose the race for billions of investments.” In a LinkedIn post, Schmall called for “an IRA matching clause” to be introduced to Europe.

IRA also has provisions benefiting U.S. free-trade partners Canada and Mexico. This encouraged Volkswagen to establish its first gigafactory for EV battery cells outside Europe in Canada.

The German auto manufacturer is simultaneously halting plans to establish a battery plant in Eastern Europe. The decision can be seen as a result of uncertainty surrounding the EU’s plan.

Asian manufacturing giants are also encouraged to invest in the U.S. following the announcement of IRA. South Korean tech LG announced last month it plans to build a $5.5 billion battery manufacturing complex in Arizona. The company “aims to respond to the fast-growing needs for locally manufactured batteries on the back of the IRA.”