France in the European battle for gigafactories
France in the European battle for gigafactories
€25bn of investment and 12,000 jobs at stake
This is the English translation of the study “Méga-usines : 5 grandes implantations industrielles que la France ne doit pas rater en 2023” I published with the think-tank Le Millénaire in February 2023.
For a shorter version, I published an op-ed on fdi Intelligence, the Financial Times global investment website.
While the Choose France summits have highlighted France's attractiveness for foreign industrial investment, the country has seen many large-scale projects slip through its fingers, such as Tesla, Intel and TSMC. Today, France is all the more in need of hosting the next "mega-factories" to be set up in Europe, as it has become more de-industrialized than its European neighbors.
Hosting the major industrial investments to come in Europe would enable France to :
maintain a critical industrial size to reduce the gap with our European partners,
reduce our massive trade deficit,
gain in sovereignty.
This study aims to :
summarize France's successes and failures in setting up "mega-factories",
detail the next 5 major industrial locations that France must not miss,
outline the measures in place to attract major industrial sites to France,
and propose new measures to improve France's attractiveness to mega-factories.
In this note, we define "mega-plant", gigafactory or large-scale foreign industrial investment as follows: an industrial project in excess of €500m with majority foreign capital that is the subject of competition between countries to host it.
Study plan
I. France struggles to attract major industrial projects
A. Attracting major industrial projects is fundamental to creating a sustainable dynamic for the country's reindustrialization
B. Setting up major industrial projects: France's mixed record
1. France has succeeded in attracting major projects
2. France has missed out on the major industrial projects of recent years in Europe
II. 5 major investments to come in Europe: France must not miss the industrial catch-up session
A. Moderna
B. Prologium
C. Vinfast
D. BYD
E. Samsung
F. Summary: €25bn of investment and 12,000 jobs at stake
III. Giving France the means to attract these projets
A. Initials steps have been taken
B. But France still has work to do
1. The time it takes to set up a factory in France remains a black mark
2. France's overall attractiveness must continue to improve
3. Making the most of nuclear power
4. Facing up to new American competition
Conclusion
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I. France struggles to attract major industrial projects
A. Attracting major industrial projects is fundamental to creating a sustainable dynamic for the country's reindustrialization
It's no secret that France is one of the most de-industrialized countries in Europe. Industry's share of GDP is 16.8%, compared with 23% for the EU average and 26.6% for Germany. Industry's share of GDP has also declined faster in France: between 1991 and 2016, the relative decline in the weight of industry was twice as great in France as in Germany, according to France Stratégie.
We won't go back over the need to reindustrialize France here: it's an objective now widely shared by the country's political and economic forces. To achieve it, there are 3 main solutions:
Support the existing industrial fabric: this is the aim of France Relance's investment subsidies;
Support the emergence of new French industrial players: this is the aim of France 2030 innovation plan;
Welcoming foreign industrial investment: this is the aim of our attractiveness policies. Some major industrial investments have had a very positive impact on the French industrial fabric. For example, the Toyota plant in Valenciennes, which opened in 2001 and produces 300,000 cars a year, now accounts for over 20% of French automotive production (1.4 million vehicles by 2021). It has attracted many of the Japanese automaker's suppliers in its wake.
France's quantitative track record in terms of attracting foreign industrial investment is respectable, as the EY European investment monitor 2022 barometer shows (see table below): for several years now, France has been the top recipient of foreign industrial investment in Europe. Attractiveness measures taken in recent years (lower corporate tax, lower labor tax, labor market reform) have contributed to this performance.
The problem lies at another level: projects in France create fewer jobs and are more often site extensions than in neighboring countries (see the 2 graphs below). While greenfields projects (i.e. those that are not extensions of existing sites) account for over 3/4 of projects in Germany and the UK, their share is less than 1/3 in France.
France therefore has particular difficulty in attracting new large-scale industrial facilities.
B. Setting up major industrial projects: France's mixed record
1. France has succeeded in attracting major projects
In recent years, France has succeeded in attracting major foreign industrial investment despite competition from other countries:
STMicroelectronics / GlobalFoundries: the Franco-Italian leader and the Emirati-funded American company announced in July 2022 that they would invest €5.7 billion and create 1,000 jobs in Crolles, Isère, to increase their semiconductor production. The project will receive €2.5 billion in subsidies. The French site was in competition with one in the USA and one in Singapore.
France fought hard to obtain the project, with Emmanuel Macron and Bruno Le Maire personally involved in convincing the American manufacturer. They wanted to make up for the failure of Intel, which had announced 4 months earlier that it would be locating its future European plant in Germany. However, this project is not a new facility, but an extension to the existing STMicroelectronics site. According to N. Dufourcq, Chairman of BpiFrance, this site should generate €4 billion in exports per year.
Envision / AESC: the Sino-Japanese manufacturer is to build a battery plant in Douai (northern France, in the so-called Battery Vallery or “Vallée de la Batterie”) to supply the Renault factories in the region. The €800 million investment is expected to create 1,500 jobs by 2024, with a potential additional phase of up to €2 billion and 3,000 jobs by 2029. France was competing with a Czech and a Finnish site.
While these are major investments in terms of size, I haven't added the other 2 electric battery gigafactory projects, ACC and Verkor, to this list:
Verkor has mainly French shareholders (Renault, Schneider Electric, Capgemini and Arkema), and while Italy and Spain were mentioned as possible locations for the Verkor gigafactory, the 3 sites on the final shortlist were all in France (in the Indre, Nord and Seine-Maritime departments).
ACC has predominantly French shareholders (Stellantis + TotalEnergies = 66%, Mercedes-Benz = 33%), and the French gigafactory is a partial replacement for a Stellantis combustion engine plant. So it's not a greenfield project. What's more, a gigafactory of the same size will be built in Germany and Italy by ACC.
Similarly, as regards the GravitHy project to invest €2.2 billion in Fos-sur-mer to produce green steel, the consortium behind the project is overwhelmingly French (Engie, Forvia or IDEC).
If these 3 future plants are major projects, it would not have been correct to consider them as foreign industrial investments that were subject to international competition for their location.
Eastman: the American chemical company is to set up a molecular plastic recycling plant in Normandy. The €850 million investment is expected to create 350 jobs. Normandy was in competition with 2 other sites located in France, but Eastman did not disclose any competing sites in Europe.
The investment benefited from a €62 million national subsidy (via the national call for projects on plastics recycling), €31 million in European aid (just transition fund) and €4 million from the Normandy Region.
Alteo/Wscope: French alumina supplier Alteo and South Korea's Wscope are to invest €600 million in the Hauts-de-France region to build a plant for the production of separator films (key battery components, located between the cathode and anode) for electric batteries. This site will supply the 3 future battery gigafactories in the Hauts-de-France region (ACC, Envision/AESC and Verkor). The location of the site is to be specified within the next few months. The companies did not specify whether the French site had been put in competition with foreign sites.
Having listed these major French successes, we will unfortunately see that the sites missed by our country are of much greater size, both in terms of investment and job creation. While France has attracted some "beautiful projects", the "very big projects" have all landed in Germany.
2. France has missed out on the major industrial projects of recent years in Europe
1. Tesla
The American automaker has chosen to set up near Berlin (€5 billion investment) in 2019. The production capacity of the 300-hectare gigafactory is 500,000 cars a year, equivalent to 35% of French car production! The Berlin site won out over several French sites, including one in Melun (suburb of Paris). This failure is all the more serious given that Tesla is planning to build the world's largest battery factory nearby to power its site (250 GWh annual production capacity).
The reasons for France's failure are diverse: shorter implementation times in Germany, the excellent reputation of German engineering and the lack of sufficiently large sites in France.
Production of electric cars has begun, and the site has already become Brandenburg's largest employer, with 7,000 jobs at present and 12,000 in the future.
2. Intel
The American manufacturer has also chosen Germany as the location for its next European chip plant. The decision was announced in March 2022. France missed out on one of the biggest industrial investments in history on European soil: €17 billion in investments and 3,000 direct jobs. The 400-hectare site will be located in Magdeburg, capital of Saxony-Anhalt.
There are three main reasons for the French failure:
the highly reactive German administration ;
the promise of a €2.7 bn federal subsidy (plus a €4 bn European subsidy);
the plant's future customers will largely be German (carmakers and electronics specialists), illustrating the virtuous circle of a country that has not opted for deindustrialization.
It also seems that France, which had proposed Châteauroux, was unable to provide the best site, as explained by the 01.net website: "At the conference dedicated to the French press, the first question asked was obviously 'why Germany and not France? Far from being evasive, the answer was clear. "It wasn't Germany that was chosen, but the Magdeburg site. We evaluated a number of quality applications, including French ones, using a wide range of criteria such as local talent, infrastructure, water quality, access to energy, etc.", explained Intel CEO Pat Gelsinger.
France also missed out on Intel's second European investment: a chip encapsulation plant representing an investment of €4.9 billion. It will be located in Poland.
France has a (small) consolation prize: Intel will set up a research center in Paris-Saclay
3. TSMC
After Intel's failure, it's more bad news for France. According to the Financial Times of December 23, 2022, TSMC, the world's leading Taiwanese chipmaker, is in talks with the German authorities to set up its first European plant in Dresden. One of the points under discussion is the amount of subsidy TSMC will receive for this project. Nothing official yet, with the final investment decision expected to be announced in early 2023. Perhaps there's still a chance of attracting the plant to France?
This project, which would have enabled France to close the gap after Intel's failure, will accentuate Germany's overwhelming dominance in chips in Europe. TSMC CEO C.C. Wei declared on January 12, 2023 that "we are evaluating the possibility of opening a plant in Europe in mature technologies to better serve our European automotive customers", which lends credibility to a German plant, given its dominance of European automotive production (3.1 million vehicles produced in 2021, compared with 1.4 million for France). Unfortunately for France, the vicious circle of deindustrialization is self-perpetuating.
To give an idea of the scale of the investment that TSMC could announce, let's recall that the company is currently building a $12 billion plant in Phoenix, Arizona. As Le Monde explained on January 7, 2023, the United States fought vigorously to see this plant set up on its soil: "Morris Chang, the founder of TSMC (...) and father of the Taiwanese chip industry, railed against this project, denouncing the exorbitant costs and difficulties of production in the United States compared with Taiwan. His group finally gave in to joint pressure from politicians and its American customers."
4. REC SOLAR
The Indo-Norwegian company announced in December 2022 that it was suspending its €700 million solar panel plant project in Lorraine (eastern France). The group's next plant will be in the United States. The decision was prompted by the energy crisis in Europe and the higher level of foreign subsidies: the company told L'Usine Nouvelle that "these strategic decisions would be arbitrated according to market and financing opportunities, while there is a huge amount of support for the manufacture of photovoltaic products in the world, and Europe, at this level, is not yet up to speed".
At a time when France is preparing to develop solar energy on a massive scale following the "law on the acceleration of renewable energy production", this failure is a real blow, as France imports almost all its solar panels, mainly from China.
Carbon, a French photovoltaic panel start-up, is said to be in line to replace REC Solar and set up its first gigafactory here.
These 4 examples illustrate the main reasons why France has failed to attract these major industrial projects:
a shortage of available large-scale land ;
longer administrative delays;
a weaker industrial fabric (fewer outlets for future sites): the vicious circle of deindustrialization;
lower subsidies.
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II. 5 major investments to come in Europe: France must not miss the industrial catch-up session
Several foreign companies have announced their intention to set up a plant in Europe requiring an investment of over €500 million in the coming years, some as early as 2023. This is an opportunity for France to catch up. Among the most important projects, here are the next 5 not-to-be-missed locations for France.
A. Moderna
The American company is in talks with several European governments about setting up an ANRm technology plant on the continent. Let's hope that CEO Stéphane Bancel's French nationality plays a role in the choice of country: "There are regular discussions at the highest level of government, including a few days ago. I know there is a strong desire on the part of the President of the Republic," he told AFP in November 2022. The investment would be 1 billion euros, and the project is "in advanced discussions with the French government", as Sandra Fournier, Director of Moderna France, told L'Usine Nouvelle in September 2022. This plant is crucial to French and European sovereignty in vaccines.
Moderna announced in June 2022 that its first European plant will be in the UK, capable of producing 250 million doses of vaccine a year. 150 highly qualified jobs will be created. The laboratory will invest £1.1 billion, thanks to the British government's commitment to purchase vaccines from Moderna for 10 years. According to Le Figaro on 11/13/2022, this is the same type of argument that could convince Moderna to set up its plant in France: "According to a source close to the matter, Moderna is asking the French government for a 'long-term commitment' to purchase its respiratory vaccines". So the government may well have the cards in its hand to force fate...
Moderna has also launched the construction of new plants in Australia and Canada. The company has the means to achieve its ambitions: sales are set to rise from $60 million in 2019 to $19 billion in 2021.
B. Prologium
The Taiwanese manufacturer of new-generation solid lithium batteries, which has forged partnerships with Mercedes and Vinfast, is planning to build a 48 GWh plant in Europe, representing an investment of €4.5 billion.
After eliminating Poland and the UK, the final 3 countries in the running to host its European plant are Germany, the Netherlands and France. Prologium CEO Vincent Yang met Emmanuel Macron at the Choose France summit in July 2022 to discuss the project. Gilles Normand, Prologium's French vice-president and former Renault employee, told BFMTV in October 2022 that if the site is to be built in France, it will be in Dunkirk. The decision will be made in mid-2023. This location would consolidate the emerging battery valley in the Hauts-de-France region.
Prologium also wants to build a factory in the USA, and it's possible that the company will prioritize the American project at first. Prologium could be the mystery foreign company mentioned by Bruno le Maire on November 7, 2022 on BFM TV. The French Minister of the Economy spoke of "a project for the moment confidential in the electric vehicle" that would create 5,000 jobs for an investment of €4 billion, but which could unfortunately end up being made in the United States after having considered setting up in France. The Minister calls for a response to the US Inflation Reduction Act: "where I can offer a €1 billion subsidy to this company, the US is putting €4 billion on the table".
Winning the "Prologium battle" is crucial: while France should have 120 GWh of battery production capacity by 2030 (without taking Prologium into account), this figure rises to 545 GWh in Germany, 220 GWh in Hungary, 145 GWh in Great Britain and 125 GWh in Norway (see the BatteryNews.de map below).
C. Vinfast
The Vietnamese manufacturer of premium electric cars, which has just opened a showroom in central Paris, is planning to build a factory in Europe. The investment would be $2 billion to build a plant with an annual capacity of 250,000 vehicles.
Germany would be in pole position, but France and Italy could also host the plant. The former CEO of Vinfast is German and, according to some specialist media, the shortlisted sites are mainly located in Germany. Setting up in Germany would also enable Vinfast to compete with Tesla, which has its Gigafactory in Berlin.
In March 2022, Vinfast announced that it would invest $2 billion in North Carolina to build its first U.S. plant, backed by a total of $1.2 billion in public funding (mainly subsidies). Production is scheduled to start in 2024, with an initial capacity of 150,000 SUVs per year. Total investment could reach $6.5 billion, as the company also plans to build a battery factory. The total surface area of the site is 800 hectares, and could eventually employ 7,500 people.
D. BYD
The Chinese automaker, which is set to overtake Tesla as the world's leading manufacturer of electric cars in the coming months, could build 2 plants in Europe. Potential sites are currently being evaluated, but the company has not yet announced when the location will be chosen. Competition from Eastern European countries for plant locations will be fierce, as BYD aims to offer low-cost electric vehicles. But it looks as if Germany will have a head start for the first plant: the Wall Street Journal revealed on 24/01/23 that BYD had entered into negotiations with Ford to buy the Saarlouis plant, a few kilometers from the French border.
The Chinese manufacturer has just launched its first vehicles in Europe, so far all imported from China. The future plants are intended to supply the European market, which would benefit the French balance of trade if successful. The Chinese manufacturer had set up an electric bus assembly plant in Beauvais in 2017, but closed the site in 2022 due to a lack of orders. It is to be hoped that this first French venture will not be detrimental to future operations.
E. Samsung
Samsung Electronics, a subsidiary of the Korean Samsung Group and a chip giant, is considering building a foundry in Europe, according to The Korea Economic daily on October 19, 2022. Already in February 2021, Bloomberg reported that Samsung (and TSMC) had begun to study the possibility of building a site in Europe. Samsung would like to be closer to its automotive customers to reduce the risk of supply disruptions. The foundry would also enable Samsung to compete with its main competitor TSMC, which is preparing to build a plant in Germany.
For France, hosting the Samsung plant would be the ideal opportunity to make up for the failures of Intel and TSMC. Our card to play: Samsung has a long-standing collaboration with CEA Grenoble and STMicroelectronics.
Furthermore, in November 2021, Samsung announced a $17 billion investment to establish a new foundry in Texas on 475 hectares. The plant, which will create 2,000 jobs, is currently under construction and production is scheduled to start in 2024.
F. Summary: €25bn of investment and 12,000 jobs at stake
Summary table of the 5 projects that France must not miss:
These 5 major industrial projects represent an investment of €25 billion and 12,000 jobs. In the last column of the table, the most important factors in attracting these "mega-factories" are indicated. While some are not in the hands of government and local authorities, such as the presence of a pre-existing industrial ecosystem, public action can be decisive on many levels:
availability of large tracts of land,
rapidly buildable land,
amount of subsidies,
long-term contracts with manufacturers,
competitiveness and stability of energy supply.
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Other projects to watch:
Batteries: in January 2023, the Indian group Tata announced its intention to build a battery factory in Europe. However, this investment seems to be focused on the UK, as it is intended to supply the group's British factories (Land Rover).
Photovoltaics: on January 15, 2023, Alain Rousset, President of Nouvelle-Aquitaine, revealed that his region was in the running to host a photovoltaic cell factory: "The investment would be €1.4 billion and would enable the creation of 3,000 jobs." Two other regions are also in the running to host the plant.
This is probably the project of start-up Carbon, which has already announced that its gigafactory will be located in France, and which is also considering a site in Lorraine in place of the REC Solar project. The figures match those announced by the startup: in September 2022, it said it wanted to invest €1.5 billion in a gigafactory, the first phase of which would create 3,000 jobs.
If the project mentioned by the President of Nouvelle-Aquitaine is indeed the Carbon plant, we cannot include this site in our study, as it was originally earmarked for France. Indeed, the company announced its intention to build a gigafactory in France from the outset: there was no international competition to host the plant.
III. Giving France the means to attract these projets
A. Initials steps have been taken
The choice of a site for an industrial project is based on qualitative criteria (availability of land, infrastructure, quality of the workforce, local ecosystem, etc.) and quantitative criteria (level of subsidies, energy prices, cost of labor, level of taxation). Within the various benchmarks used by manufacturers, France's situation has improved overall in recent years, thanks in particular to recent reforms:
corporate tax rate reduced from 33% to 25% ;
labor costs reduction (CICE reform);
an €18 bn cut in production taxes (€10 bn in 2022 and €4+4 bn in 2023 and 2024) ;
and labor market reform.
In addition, 127 "turnkey" industrial sites (i.e. sites for which environmental procedures have been anticipated) have been approved since 2020, and in March 2022, the government launched a call for projects with local authorities to identify sites of at least 300 hectares in size, capable of hosting a very large-scale facility. According to L'Usine Nouvelle, the Intel failure "was a wake-up call for public authorities. Business France recruited a person to identify land reserves to attract foreign manufacturers. A call for projects was launched to identify these sites, which cover more than 300 hectares. Less than half a dozen have been identified.
Finally, at the France 2030 progress review in November 2022, Elisabeth Borne announced that €5 billion would be set aside to subsidize major "off-the-beaten-track" projects, such as the ST Microelectronics/GlobalFoundries project. This measure is intended to partially counter American subsidies.
The first steps have thus been taken to enable France to host major industrial investments. However, much remains to be done to ensure that we have every chance on our side.
B. But France still has work to do
1. The time it takes to set up a factory in France remains a black mark
We have seen that among the major locations that France has missed out on, excessively slow construction times are one of the explanatory factors. While the ASAP law of 2020 has helped to reduce them, Bruno Le Maire acknowledged in early September 2022 that there was still work to be done: "In the next few weeks, I will be making proposals to the President of the Republic and the Prime Minister to reduce the time it takes to set up factories in France. In France, it takes seventeen months to set up a plant, compared with eight months in Germany. We need to tackle all the obstacles that unnecessarily slow down procedures”.
The report "Simplifying and accelerating the establishment of economic activities in France", submitted by Laurent Guillot to the government in March 2022, proposes new avenues for the government to reduce delays that are still higher than in other European countries (diagram below), such as:
Appoint a sub-prefect for investment in each region
Clarify the rules governing various administrative procedures, to give companies a clearer picture of procedural deadlines and provide project developers with greater certainty, e.g. the rules governing fauna/flora inventories.
The report's proposals will certainly be included in the future "green industry" law, first mentioned by Bruno le Maire on January 5, 2023, and due to be presented in April and tabled in Parliament in June 2023. According to the Minister's initial indications, the purpose of this law will be to speed up the authorization process for new industrial sites: "There's no reason why in France we should take two years to develop an industrial site, sometimes three, when other major nations manage to do it in a few months", he declared during his vœux to economic players.
With regard to industrial land, the Zero Net Artificialization regulation poses problems for local authorities, and it is also necessary to "improve our knowledge of supply and demand. We don't know exactly what reserves are available from the State, local authorities, real estate companies, but also from major corporations", argues Vincent Moulin Wright, General Delegate of France Industrie, interviewed by L'Usine Nouvelle.
France can no longer afford to miss out on major industrial projects due to a lack of land or administrative delays. These issues are entirely up to us.
2. France's overall attractiveness must continue to improve
France must continue to improve its overall attractiveness. This requires measures that are not specifically aimed at major industrial projects, but which play a major role in their investment decisions. Major groups have teams dedicated to new industrial projects: they analyze and compare each component of a country's attractiveness. France needs to prioritize 3 issues:
i) Production taxes remain at a very high level: after taking into account the new cuts in 2023 and 2024, the gap will remain around €30 bn compared with the EU 27 average, and €60 bn compared with Germany. France remains a country that overtaxes its production base. The elimination of the C3S corporate solidarity contribution (€4 billion) should be a priority: the Conseil d'analyse économique (CAE) describes it as "the most harmful tax to be eliminated as a matter of priority". This sales tax "reduces the competitiveness of companies, acting as a tax on exports and a subsidy to imports". According to the CAE, its abolition could improve the manufacturing trade balance by €5 billion.
ii) France trains 40,000 engineers a year, but needs 60,000: "We're therefore short of 20,000 engineers a year", according to Pierre Verzat, President of Syntec-Ingénierie, a trade association representing nearly 400 scientific and technical service companies. The availability and quality of labor has become a key factor in decisions to locate industrial sites requiring highly qualified profiles. Public authorities must encourage young people to choose scientific and technological courses.
iii) The creation of a French sovereign wealth fund would also enable us to make the most of France's assets by providing financial support for major industrial projects. This "French people's fund", a sovereign wealth fund for all French citizens, backed by the colossal savings of French households (over 500 billion euros in assets, including Livret A and LDD passbook savings accounts), would enable us to prioritize a long-term economic policy based on three priorities: sovereignty, growth and innovation. This fund would enable the French to reconnect with the positive effects of the Gaullist strategist state, without suffering the harmful effects of the all-out intervention of the welfare state.
3. Making the most of nuclear power
At a time when carbon intensity is becoming a purchasing criterion for consumers, and energy prices are fundamental to investment decisions, France's electricity is among the most de-carbonized in Europe (53 gCO2eq/kWh vs. 414 gCO2eq/kWh for Germany) and among the most competitive in Europe in terms of production costs, thanks to nuclear generation (around €60/MWh). However, French industry only partially benefits from the low production costs of nuclear-generated electricity: while some manufacturers benefit from a competitive tariff on part of their consumption via Arenh (due to expire in 2025), the price of electricity is coupled to the price of gas. The government has therefore launched "the battle for decoupling" in Brussels, and is asking the Commission for a concrete response by mid-year.
But if France fails to win this battle, Olivier Lluansi, a former industry advisor to François Hollande, suggests that a nationalized EDF "could offer companies negotiated contracts, since its obligation would no longer be profit at any price. EDF could offer long-term, competitive contracts" (Atlantico, 12/27/22). According to Les Echos (12/10/22), this type of contract is being considered by the government: "While waiting to see more clearly about these negotiations, the government is studying other levers to calm industrialists' alarms. "We want to reproduce electricity supply contracts between manufacturers and EDF along the lines of those concluded by the Exeltium consortium in the 2010s," says Roland Lescure, Minister Delegate for Industry. Set up by twenty-six industrialists over ten years ago, the Exeltium consortium's agreement with EDF secured a supply of nuclear electricity at predictable prices and volumes for twenty-four years".
These competitively-priced over-the-counter contracts lasting more than 10 years (based on a cost+ model: production price + margin, i.e. around €70/MWh) could also be offered to manufacturers who are still reluctant to set up a "mega-plant" in France. By offering them stability and visibility on their future electricity costs thanks to its nuclear fleet, France would hold a very convincing argument.
4. Facing up to new American competition
Beyond intra-European competition, the United States represents a formidable new competitor for the location of major industrial sites. The implementation by the United States of the Inflation Reduction Act (IRA), with its massive subsidies for industrial investment ($369 billion earmarked for energy transition and green industries), is turning certain projects away from Europe, not to mention the impact of energy costs 4 to 5 times lower than in Europe.
We saw earlier that the massive subsidies made possible by the IRA could lead Prologium to prioritize the United States as a location for its future plant. Attracted by the subsidies, Swedish battery manufacturer Northvolt announced in October 2022 that it might postpone its planned factory in Germany in favor of building a site in the USA. As reported in the Financial Times on 01/25/23, the economic development agencies of the American states (Ohio, Michigan, Georgia...) are currently organizing tours of Europe to convince European manufacturers and startups to locate their plants there, with the IRA able to underwrite more than half of their investments.
Under French impetus, Europe is preparing to react. The subject is on the agenda of the European Council on February 9 and 10, and on February 1, 2023, the Commission presented its Green Deal Industrial Plan. In the short term, the plan calls for more flexible control of state aid (by, for example, making it possible to match a subsidy offered to a company by another country) and the recycling of funds from the European Recovery Plan to zero-emission industries. In the medium term, a European sovereign wealth fund for industry would be created.
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Conclusion
2023 will be the year of the first verdicts concerning the 5 industrial mega-projects analyzed in this note: €25 billion of investment and 12,000 jobs are at stake.
These 5 projects are representative of the key industries of the coming decades: RNA vaccines, electric vehicles and semiconductors. Attracting them would enable France and Europe to position themselves in the industries that will ensure our sovereignty and prosperity in 2030 and 2040.
Attracting at least 2 of these 5 projects would be a creditable result for France:
even if the competition is strong, we can be reasonably optimistic about the Moderna factory;
the Prologium gigafactory would bolster the budding battery ecosystem in the Hauts-de-France region, but US subsidies will inevitably weigh on the choice of Taiwanese company;
repeating the "Toyota Valenciennes" success story by winning the Vinfast plant or the second BYD factory would be a superb result, helping to consolidate French automotive production and reduce an automotive trade deficit that has reached €18 billion by 2021;
finally, attracting Samsung's "mega fab" would be a huge victory: quite simply, it would represent the biggest foreign industrial investment in France's history.
Let's hope that the Choose France summit, scheduled for May 2023, brings its share of good news.
Guillaume Gau
Study published in February 2023 for the think tank Le Millénaire.