- Last week, the German government confirmed it will fund part of Tesla’s Grünheide factory.
- Sources told Insider Deutschland that Elon Musk’s company will receive billions through a program designed to create a European battery ecosystem.
- German taxpayers will be funding the US car manufacturer’s German factory with a 9-digit figure, but the government declined to offer a specific figure.
- Visit Business Insider’s homepage for more stories.
There were probably a few champagne corks popped in California last week.
The German Ministry of Economics announced last week which companies had won the bid for public funding as part of its Important Projects of Common European Interest (IPCEI) program for battery cell production.
One of the 11 companies to win funding was Tesla, meaning its under-construction battery cell factory in Grünheide — just outside Berlin — will now be receiving state funding from the German government.
While the Federal Ministry of Economics hasn’t confirmed how much funding the auto-giant will receive, Insider Deutschland found through several government sources that it will be in for Tesla will be in the single-digit billions.
In other words, German taxpayers will be funding the US car manufacturer’s German factory with a 9-digit figure.
When asked about the total amount of funding and how it was reached, Germany’s ministry of economic affairs told Insider Deutschland: “The state aid framework for ‘Important Projects of Common European Interest’ is based in principle on expenditure for research activities. Investments in scaling are only recognized under state aid law insofar as the scaling is a result of research and development activities and itself includes an important research and development component.”
A spokeswoman for the ministry, which declined to give an exact amount, said: “There is no general formula for calculating funding.”
The state of Brandenburg will have to pay part of the funding. Germany’s federal and state governments share the costs in these sorts of arrangements, with government sources privy to the information telling Business Insider that Brandenburg will have to contribute roughly a third of the funding.
IPCEI funding is supposed to assist Europe in competing with China and the US
It’s quite unusual that Tesla was awarded funding under the IPCEI program at all. The program, which runs across the EU and was originally launched in 2014. It’s designed to “increase Europe’s competitiveness” in key technologies and create an ecosystem on the continent for battery innovation and production.
Germany’s minister of economics Peter Altmaier said in a government press release: “The second battery IPCEI coordinated by Germany clearly shows the European battery industry is becoming a reality. Germany and Europe will develop competitive, innovative, and environmentally friendly battery cells themselves. This will create extensive scope for private investments and new, future-proof jobs.”
Ultimately, the goal is to become independent of the US and China where key tech like battery cells is concerned.
Of course, the IPCEI program is primarily intended to make German and European companies fit for competition with China and the USA – and at best to shape them into so-called “European champions”. For key technologies, one does not want to be dependent on the two great powers in the future. One of these key technologies is battery cells.
The fact that the largest competitor of German companies — from BMW and Volkswagen to Daimler — has been awarded the funding may seem somewhat counterintuitive.
In spite of this, according to CEO Elon Musk, Tesla’s factory will create up to 40,000 jobs in Grünheide — and that figure doesn’t account for jobs that will be created in the supplier industry. It’s set to open this year.
The government’s aim appears to be that, through using the IPCEI funding to invest in the US-controlled factory, to revive the structurally weak region and create jobs. Much more important to the program, however, is to build a European ecosystem for emerging technologies — which, in this instance means battery cells.
That said, there’s one thing Tesla has a proven track record of — it doesn’t share its charging networks nor its knowledge with the competition.
It’s one of the strategies that, to this day, has set Tesla apart as one of the most successful players in the industry. At present, there seems to be little incentive for or indication that Tesla would stand to gain anything from joining a European “ecosystem” for battery cells.
Tesla has not immediately responded to a request for comment.