biden inflation reduction volkswagen

Volkswagen could give Biden a major victory

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biden inflation reduction volkswagen

Volkswagen could help President Joe Biden make the case that his landmark Inflation Reduction Act (IRA) was worth its $437 billion price tag if the automaker decides to establish a battery plant in the United States.

On Wednesday, Reuters reported that the German vehicle manufacturer was considering building a battery plant in the U.S. because it could receive $10 billion in subsidies from the IRA. Volkswagen’s waiting on Europe’s response to the IRA before making a final decision, but a new plant in the United States would give American workers jobs and signal interest among foreign companies to manufacture in the U.S.

Speaking to Newsweek, GOP Senator Mitt Romney of Utah, a member of the Committee on Foreign Relations, said the latest reports surrounding Volkswagen show “the market at work,” adding that he would be “glad” to see the automaker invest in the U.S.

One of the main components of the federal law, which Biden signed into effect last summer, was an investment in domestic energy production which included tax incentives for businesses that embrace clean energy. While the legislative package was criticized for its cost, the record $369 billion that was allocated to climate and green energy policies could soon pay off for the president.

Biden Inflation Reduction Volkswagen President Joe Biden speaks during the annual House Democrats Issues Conference at the Hyatt Regency Hotel March 1, 2023, in Baltimore, Inset: The Volkswagen logo is seen on a VW ID Buzz, the new fully electric-driven microbus of Volkswagen Commercial Vehicles, at the Volkswagen plant in Hanover, northern Germany on June 16, 2022. Drew Angerer/Axel Heimken/AFP

The European Union has recently become embroiled in a tense race with the U.S. over Biden’s landmark legislation. While European officials say they support American efforts to have a more sustainable economy, they worry that the subsidies provided by the IRA could divert investment from the 27-member bloc.

“We want to have a virtuous competition,” Democratic Senator Ed Markey of Massachusetts, a member of the Commerce Committee, told Newsweek. “So, to the extent to which the IRA is encouraging Volkswagen to build battery plants here, that’s great. If Germany wants to have them there, they should give benefits as well so that we have an absolute battery deployment of choice.”

Volkswagen said in a statement to Newsweek it was still evaluating locations for its next plant and that “no decisions have been made yet.” While the company intends to stick to its plan to bring 240-gigawatt hours of battery production capacity to Europe by the end of the decade, the company said it needs “competitive framework conditions.”

“That is why we wait and see what the so-called [European Union] Green Deal will bring,” Volkswagen said.

Volkswagen isn’t the only automaker reportedly considering a move to the U.S. over Europe. An executive at a meeting with European Union officials said authorities in U.S. states contacted them about making a switch. The executive said each official highlighted the IRA, and when companies put the figures together, “the conditions they offer are much more interesting than the conditions they offer in Europe,” according to the Financial Times.

It’s unclear how many jobs the new plant could create, but at a large plant in Germany, Volkswagen employs nearly 7,000 people. A Volkswagen battery plant in Chattanooga, Tennessee, employs 4,000 people, according to the Chattanooga Times Free Press.

Senator Chris Coons, who serves on Foreign Relations, said that he believes the adoption of clean energy options can be “harmonized” between both sides of the Atlantic. Amid the important conversations taking place between the White House and EU, the Delaware Democrat expressed hopes that the provisions provided by the IRA will lead to a greater discussion, including on tariffs tied to the carbon content of imported goods that American products could face in the near future.

“I am hopeful that we can avoid a needless contest of tariffs and incentives and instead find an appropriate way to harmonize our shared climate ambition, our shared need for access to critical minerals, and a path forward toward growing industrial production and advanced manufacturing in both the U.S. and Europe,” Coons told Newsweek. “We have enough shared interests, capabilities, and values that we should be able to accomplish this.”

Although lawmakers on both sides of the aisle have admitted that Biden’s legislation has successfully attracted foreign investments into U.S. energy productions, some senators remain at odds with the law over its content and price tag.

In a conversation on Capitol Hill, Senator John Barrasso of Wyoming, the Senate Republican Conference chair and a member of the Foreign Relations Committee who voted against the IRA, called passage of the IRA a “mistake.”

“It was an abuse of government spending, and I’m going to continue to oppose those parts,” he told Newsweek, declining to speak further on the Volkswagen matter.

Newsweek reached out to the Biden administration for comment.


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