Volkswagen Group is hitting the brakes on its plans to build a battery cell factory in eastern Europe as North America looks much more attractive.

The automaker is reportedly prioritizing a similar facility in North America after estimating it could get up to $10.6 billion (10 billion euros) in US incentives.

Volkswagen is also waiting for Europe's response to the US Inflation Reduction Act (IRA) before moving further with plans to build new battery factories in Europe, the automaker said on March 8 according to a Financial Times report.

Europe's largest automaker told EU officials last week that it expected to reap between $9.5 and $10.6 billion (9-10 billion euros) in subsidies and loans from the IRA and other schemes over the lifetime of a potential cell factory in the US, according to the business paper.

"Plans in North America have moved forward faster than expected and overtaken decision making in Europe," one person with direct knowledge of the decision making at VW told FT. Volkswagen already had plans for a cell factory in North America, independent of the facilities planned in Europe.

The European Commission is expected to publish a Net Zero Industry Act this week as part of its response to the US green scheme. However, an early draft has failed to impress executives from the battery industry, with one complaining about "an absence of concrete measures" and another saying the conditions offered by the US are "much more interesting."

Gallery: Volkswagen Group's new Salzgitter battery cell gigafactory and new unified cell

Meanwhile, Volkswagen Group said no decisions had been made on the locations of its plants in North America or Europe, adding that it remained committed to its plan to build more cell factories for a combined output of about 240 GWh in Europe by 2030 – assuming the "right framework conditions" are created.

Two years ago, Volkswagen Group pledged to build six gigafactories in Europe, including one in eastern Europe expected to open in 2027. Hungary, Poland, Slovakia and the Czech Republic were competing to host the facility.

The first of the six plants opens in Sweden this year as a joint venture with Northvolt, in which VW holds a 20 percent stake. A second plant is under construction in Germany with China's Gotion High-Tech, in which VW has a 26 percent stake. The Salzgitter facility will produce new unified cells for volume segment EVs.

Volkswagen has confirmed another cell factory will be built in Sagunto, near Valencia, Spain, with production starting in 2026. 

The automaker said in October 2022 that it planned to decide on a location for the eastern Europe factory in the first six months of 2023. The two remaining sites are yet to be announced.

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