As the one-year anniversary of the US’s landmark Inflation Reduction Act (IRA) nears, it is clear that the $396bn-worth of green tax credits, grants and loans has been a magnet for projects in everything from electric vehicles (EVs) to clean fuels to solar panels. 

Gigafactories are being lured, too. Benchmark Mineral Intelligence data shows that in the 11 months after the IRA took effect on August 16 2022, the US battery pipeline grew 67.3% compared with 26.1% in Europe. 

Numerous corporate leaders have explicitly named the IRA as the reason why they have chosen to invest in the US over other markets, including Ford, Belgian green hydrogen specialist Tree Energy Solutions and power generation firm Drax Group. 

But for some green megaprojects, Europe still trumps the US. A case in point is Taiwanese battery-maker ProLogium which chose to build a €5.2bn solid-state battery factory – its first large-scale operations overseas – in France. On August 3, the European Commission approved €1.5bn in state grants for the project. Gilles Normand, president of ProLogium Europe, spoke with fDi about how politics and incentives gave Europe the edge of the US.

Q: What was ProLogium’s initial thinking that led it to choose Europe? 

A: In the long run, we will have to go into both regions. But we can’t yet as we are a [relatively] small company with 800 people on the ground. We need to go step by step. The question was which we should tackle first. At the end of 2022, battery EVs in Europe made up about 12% of new car sales. In the US, that figure was half of that at 6%. Plus, around 50% of European customers project themselves as having an EV in the future, while in the US it is only 25%.

Q: What about incentives? Were you not swayed by the IRA?

A: The IRA is very generous, and you can get much more incentives by amount than you can in Europe. But there is a fundamental difference [between the two]. The IRA kicks in once you start selling kilowatt hours. You have to shoulder the initial investment to build your gigafactory, start producing and start selling, which typically takes three to four years. The tax breaks extend up to 40 years if you negotiate with the individual state, too. 

So if you are a rich carmaker with €50bn cash in hand, obviously the IRA is a very interesting proposition. But what we’ve negotiated with the French government and European Commission is support in the investment phase for research and development, and to start building our gigafactory. This lowers the capital expenditure. We are a private company and have raised [just over] $800m, but we have a €5.2bn mountain ahead of us to climb. So any way to reduce this amount by a good level is appreciated more than cash we can get for over 40 years after we start producing. This favoured Europe, in terms of deciding to go there first.

Further reading on the Inflation Reduction Act:

• Biden's industrial plan triggers wave of investment pledges
• 'If the industrial policy is better elsewhere, we will go elsewhere'
• US's incentives largesse remains no match for FDI rivals

Q:  Did EV regulations and government policies have a role, too? 

A: Yes. In Europe we have supranational regulations which ban internal combustion engine sales from 2035. It’s an EU-wide mandate, so national elections won’t change anything. But in the US this is more linked to the administration. Republicans and Democrats don’t have the same support for EVs, so that creates a bit more uncertainty.

In Europe, because of the 2035 ban, the 10 largest, most important automakers have decided to go full electric from 2025 to 2031. That creates a high need for battery supply capacity, so from a market maturity perspective Europe is ahead of the US.

This interview has been edited for clarity and brevity.