Electric vehicle battery maker Northvolt's planned factory in Germany may be delayed as surging energy costs threaten the viability of battery cell plants across Europe.

According to Bloomberg, Sweden-based Northvolt will decide next year whether to build the Heide facility in northern Germany in time for production to start in late 2025 or expand first in North America, where the US is attracting cell manufacturers with billions of dollars in incentives.

"Given what is happening in North America and what is happening in Europe on the other hand, with energy prices not the least, we are during next year going to decide what to prioritize."

Jesper Wigardt, Northvolt spokesman

The representative added that a decision in favor of North America might delay the German plant "a bit."

The Heide site is among the first EV projects in Germany that may get postponed because of rampant energy inflation. The country's industrial sector has been heavily reliant on cheap gas from Russia and has suffered significantly since Moscow limited shipments, sending gas prices soaring. 

The head of the Volkswagen Passenger Cars brand, Thomas Schäfer, said Europe's energy crisis could render cell plants in the region "practically unviable," and production may move elsewhere as a result.

Gallery: Northvolt batteries and manufacturing plants

Europe's loss could be North America's gain as the Inflation Reduction Act, the US climate and tax law, aims to boost domestic EV production and reduce reliance on China for battery components and materials.

"IRA has changed the dynamics for suppliers, the entire value chain is looking at North America instead of at Europe. European politicians on various levels need to act quickly to ensure that Europe remains attractive to invest in."

Jesper Wigardt, Northvolt spokesman

Wigardt added that Northvolt has not made a final decision on the Heide timeline, but said the company will have to expand in Europe eventually to be a leader in that market.

Announced in March, the Heide project is supposed to have an annual capacity of 60 GWh, enough for roughly 1 million EVs. The plant is due to build its first cells in late 2025, with commercial output expected to start the following year.

Northvolt has received investments from several automakers, including Volvo Cars, BMW Group and Volkswagen Group. The latter plans to have six battery factories in full operation across Europe by 2030 through its battery unit PowerCo.

Volvo Cars and Northvolt are planning a joint battery manufacturing plant in Gothenburg, Sweden, set to open in 2025. The facility will make battery cells specifically developed for use in next-generation Volvo and Polestar cars.

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