Volkswagen announces a battery factory in Spain after the Government approves its electric car aid plan

Volkswagen announces a battery factory in Spain after the Government approves its electric car aid plan

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Volkswagen announces a battery factory in Spain after the Government approves its electric car aid plan

Herbert Diess, president of the Volkswagen group, on a recent visit to the Seat plant in Martorell (Barcelona).Reuters

The Volkswagen group, in which the Spanish firm Seat is integrated, announced this Tuesday that it intends to install its third battery factory for electric cars in Spain, after which it has already announced for Germany and Sweden. This announcement coincides with the approval, in the Council of Ministers, of the Strategic Project for Economic Recovery and Transformation (PERTE) that the Government has agreed to promote the transformation of the sector towards the electric and connected model. The automotive group has confirmed that it will request to participate in the project, whose public investment is key for the battery factory, but has not specified in which autonomous community the plant will be installed.

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The Government approved this Tuesday the first major strategic project to take advantage of European recovery funds, and the first business responses have not been long in coming. The first PERTE – the instrument that will make it possible to benefit more efficiently from Next Generation funds – is intended to promote the transformation of the automotive sector. It includes a public injection of 4,295 million euros, which will attract, according to the Executive’s estimates, a private investment of 19,700 million. The Minister of Industry, Commerce and Tourism, Reyes Maroto, announced this at the press conference after the Council of Ministers, in which she described the plan as “historic”. “It is the first time that the Government has promoted the transformation of the sector. Spain has to lead the change in mobility, we want to be part of this revolution ”, he said.

Among the requirements to be eligible for PERTE, they highlight that the candidatures must include at least five companies from two autonomous communities, and install a battery factory. Hence the significance of the announcement made by the group’s CEO, Herbert Diess, who this Tuesday presented the project Future: Fast Forward, Volkswagen’s roadmap until 2030. The location of a battery factory in Spain was highly anticipated by the sector, although it remains to be seen where it will be installed. Several autonomous communities have claimed this factory for their territory. The Volkswagen group has two plants in Spain – that of Seat in Martorell (Barcelona), and that of the Volkswagen brand in Landaben (Navarra) -, aligned in a corridor where battery production is expected to be installed.

The Volkswagen group has highlighted, in a statement, that its intentions in Spain are closely linked to the PERTE approved by the Government. The group’s objective is to “establish a hub of electric mobility in Spain ”and turn the country into“ a strategic pillar of Volkswagen’s global electrification plans ”. In this sense, they will request to participate in the PERTE, whose first calls will come out in October, and specific projects will begin to be approved in February. “We are ready to establish the entire electric mobility value chain in the country, including the production of electric vehicles, as well as their components, and a new battery factory for the group,” said Diess. The third “gigafactory” of the group, as its managers have baptized it, “would allow a highly secure supply for the production of electric vehicles planned in the country”, said Thomas Schmall, Chairman of the Board of Directors of Seat.

The battery factory is essential to start manufacturing electric cars in Spain. The Seat plant in Martorell wants to be Volkswagen’s great ally for this objective, which the group places as of 2025. That year, as announced by Diess, a family of urban electric cars, called Small BEVs, will begin to be manufactured. This task could fall to Spain, and the Volkswagen statement details that the final decision will be made “depending on the general context and support from the public sector.” Seat president Wayne Griffiths also participated in the event to present the roadmap until 2030, reiterating the goal of converting the Martorell plant into a 100% electric vehicle factory. The goal of the Volkswagen group is that by 2030 electric vehicles represent 50% of its sales in the world.

The composition of PERTE

The plan for the transformation of the sector, as explained by Maroto, has two axes: one is the transformation of the industrial value chain. “We are going to invest more than 3,000 million euros so that our factories can make electric models,” said the minister. This block includes the installation of battery factories. The second block is to invest in facilitating measures to democratize the purchase of these vehicles. This will be done through the Moves III and Moves Singulares plans, to help purchase electric cars; a plan to regulate the service of vehicle charging points; the Climate Change Law; a professional training plan to equip professionals for this new stage in the sector; and the deployment of 5G technology, key to the connected car.

With this plan, the Government foresees an impact on the generation of employment and on the revitalization of the electric vehicle market. Minister Maroto has assured that in 2023, when the PERTE application period is completed, there will be 250,000 registered electric vehicles. In 2019, before the pandemic, 10,047 passenger cars of this type were registered. “The milestones are ambitious, but it is our duty, because the pandemic has accelerated changes, and because our society and our business fabric are asking us to do so,” the minister stressed.

The Government has organized the management of the different candidatures to participate in the PERTE of the electric and connected vehicle in business groups in which at least five companies from a minimum of two autonomous communities have to participate. 40% of the business weight must be SMEs and must also include some entity focused on research. In addition to including the design and manufacture of electric vehicles, each project must have facilities for the manufacture of battery cells (at the moment there are none underway in Spain and they are a priority for the European Union), which will only be an exception for those plans that have hydrogen-based mobility as their axis. As complementary elements to the project, other factors will be taken into account, such as the inclusion of microconnectivity projects and recharging systems. The objective is to ensure the entire value chain, although lithium mining extraction will be excluded from the aid.

The Ministry of Industry does not rule out including in the PERTE more than one project that combines a fuel cell factory. At the moment, in addition to that of the Volkswagen group, there is a project presented, the Extremadura, while there is another advanced in Valencia. Setting a minimum amount of subsidies for a single project has been ruled out. The Executive considers that the almost 3,000 million euros that will be allocated to non-refundable funds, resources from the Next Generation EU, will allow the integration of different business approaches. Hence, their estimates indicate a job creation of up to 140,000 jobs and an economic contribution equivalent to between 1% and 1.7% of GDP.

The PERTE accumulates delays. Its approval has taken more weeks than initially planned and now it is expected that the final call will be ready in October, to end up solving the competitive bidding process as of February. Industry wants its plans to have a knock-on effect for brands with a manufacturing presence in Spain to assign the assembly of new electric and hybrid vehicles to those factories.

In addition to the hosedown of aid, the Government maintains its option of having a minority stake in consortia that include gygafactories. Control is not sought so much, nor is the decision on the location of these – the idea is that it be the industrial partner specialized in manufacturing – but rather to offer an image of commitment to state investors.

The final decision on what makes up this first PERTE will depend on an interdepartmental table in which all the affected ministries will participate. The Minister of Industry, Reyes Maroto, will be the president of the governance body, although the day-to-day will fall on a well-known and respected coordinator in the automotive sector. This must have a special job in Brussels, where it must mediate with the European Commission in the face of management problems that PERTE may have. In parallel to the government table, the automotive table, made up of autonomous communities, employers and unions, will have a voice, although until now it has barely met.