Volkswagen postpones decision on eastern Europe gigafactory

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PRAGUE/FRANKFURT (Reuters) -Volkswagen AG is postponing its decision on where to build a gigafactory for electric car batteries in eastern Europe beyond 2022, pointing to economic uncertainty and high energy prices in the region.

"Volkswagen AG (OTC:VWAGY) and its battery company PowerCo are continuously evaluating suitable sites for their next gigafactory in Europe," the carmaker said by email on Thursday.

"There is no pressure to act as we take some more time for decision-making in light of current circumstances," it said. "At present, there is no impact on planned start of construction or start of production."

The European Union fears an exodus of investment to the United States in light of generous green energy subsidies companies are offered under the Inflation Reduction Act, just as energy prices in Europe hit record highs with next year's supply still insecure.

Sweden's Northvolt said in October it may prioritise expanding its battery plants in the United States over Europe in light of Europe's energy landscape.

In an interview on Tuesday, Volkswagen (ETR:VOWG_p) brand chief Thomas Schaefer said Europe's energy prices were making it hard to justify to shareholders why the carmaker would build a battery plant there.

"If you have the option of building a battery plant in Europe, where electricity costs 15 cents per kilowatt hour, but you can get it in China or America for 2-3 cents, we are not in a position under stock corporation law to say we will do it here out of solidarity," Schaefer said.

"This is a red-hot topic and people often underestimate how complex it is to move forward on it here," he added.

The eastern European plant would be the fourth under a plan by ex-CEO Herbert Diess to build six such sites with partners across Europe by the end of the decade.

Locations under consideration include Czech Republic, Hungary, Poland and Slovakia.

Skoda Auto, Volkswagen's Czech unit, said in October it expected its parent to make a decision on the location by the end of 2022.

Still, Volkswagen's new leader Oliver Blume is putting much of his predecessor's legacy under the microscope, overhauling the company's software strategy and reevaluating which plants make which models.

It has begun searching for sites for its first gigafactory outside Europe in Canada.