Czech authorities and Volkswagen (VW) subsidiary Skoda Auto have denied a Financial Times report that the German carmaker has shelved plans to build a huge electric battery plant in Central Europe.

The FT reported that VW will  focus on building a battery plant in the US, where it could obtain €10bn incentive under President Joe Biden's new Inflation Reduction Act (IRA) and other schemes.

The US legislation to promote green technology has created panic in Europe, where state aid for foreign investment is tightly regulated by the European Commission and cannot match the US incentives. The EU fears that the IRA legislation could mean Europe is at a grave disadvantage attracting investment in the green industries of tomorrow, such as electric batteries. It is currently considering how to match the US offer to investors.

However, Czech authorities and VW's Skoda Auto insist the carmaker’s plans for a gigafactory in Central Europe are merely postponed, and that VW is awaiting the EU decision on the new EU incentive framework. 

“Volkswagen Group is still committed to building plants for battery particles with a capacity of approximately 240 GWh in Europe before the year 2030,” a statement by  Skoda Auto reads, adding that VW “needs the right general conditions and wants to take into account the final framework of EU legislation regarding the so-called new Green Deal.”

Skoda Auto stressed that the “decision-making processes on the construction of gigafactory in Europe and North America are independent of each other.”

The FT article also prompted responses from the Czech government representatives.

“This morning I got in touch by telephone with Martin Jahn of Skoda Auto management, who confirmed to me that the decision on the gigafactoy in the USA has no impact on a similar project in Europe,” Minister of Industry Jozef Sikela (Mayors party) tweeted on Wednesday, March 8.

Government spokesperson Vaclav Smolka stated that the two gigafactory construction plans are unrelated. “Volkswagen has informed us that it wants to announce the final decision about the gigafactory in Europe, which Czech would like to host, only after the European Commission’s stance on the American anti-inflation law will be known,” Smolka told Czech Press Agency.

Volkswagen  had planned to have six battery plants in Europe by 2030, one of which would be in Central Europe, either in Czechia,  Hungary, Poland or Slovakia, sparking a massive contest to attract the carmaker. VW has three existing gigafactory sites in Salzgitter in Germany, Valencia in Spain and Skellefteaa in Sweden.

VW had been expected to announce the decision on the location of the planned gigafactory in Central Europe by December 16, but the carmaker postponed the decision shortly before the announcement.

The Czech cabinet has been very interested in having one of these in the country, arguing it is a key project for the transformation of the Czech automobile industry, which represents a quarter of the country’s exports and a tenth of its GDP.   

A location in Plzen in Western Bohemia has been discussed. However, the Plzen site has been opposed by the municipal authorities, which has damaged the country's chances. 

Governor of the Pilsen region Rudolf Spotak (Pirates), on the other hand, supports the project arguing its relocation to North America would constitute a major loss for Czechia. "I am worried that our behaviour will return to us like a boomerang. Europe seems to repeat its mistakes of letting strong investors leave for other parts of the world," Spotak was quoted as saying by Czech TV.