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Spain to invest €4.3bn in EV and battery manufacturing

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The Spanish government is planning to invest €4.3bn (£3.7bn) to kickstart the production of electric vehicles (EVs) and batteries, as part of a major national stimulus largely funded by the EU, Reuters has reported.

According to Pedro Sanchez, Spain's prime minister, the public plan will encompass the entire production chain. Grants will be given to companies with the goal of building the country’s first battery plant and boosting manufacturing of EVs.

“It is important for Spain to react and to anticipate this transformation in Europe’s automotive sector,” said Sanchez. He added that government estimates found the private sector could contribute a further €19.7bn to the initiative between 2021 and 2023.

Few industrial bidders have publicly stated their intent to seek a helping of the funds, although Volkswagen’s Spanish brand SEAT and energy company Iberdrola have teamed up to work on a bid as an alliance. Their involvement would fit within a wider project they are planning with Volkswagen which covers all aspects of EV production, from mining to battery production and the manufacturing of a finished vehicle at SEAT’s assembly plant near Barcelona. The alliance plans to promote electrification based on renewables in Spain and beyond, including through the roll-out of a network of public fast and ultra-fast charging points.

With the new investment (part of a larger €13bn package directed towards sustainable mobility), Sanchez expects the sector’s contribution to Spain’s economic output to reach 15 per cent by 2030, from around 10 per cent at present. The government projects the creation of up to 140,000 new jobs and a boost to the national economy of between 1 to 1.7 per cent.

It aims for the number of new EVs registered in the country to reach 250,000 in 2023 - an enormous jump from the 18,000 registered in 2020. It hopes that a government-backed initiative to encourage the purchase of greener cars and expansion of charging infrastructure will encourage drivers to go electric.

Spain will receive around €70bn in grants until 2026 to help revive its economy. The country has been hit hard by the Covid-19 crisis, suffering more than 80,000 deaths from almost four million cases, and a severe hit to its tourism and hospitality sectors. Consequently, it will be one of the main beneficiaries of a €750bn EU recovery scheme.

Spain is already Europe’s second-largest auto producer, following Germany, and the world’s eighth largest. The country is home to more than a dozen car factories owned by Daimler AG, Ford, Opel, Nissan, Renault and many others.

As governments push towards the phase-out of combustion engines and the automotive industry adjusts to the shift towards EVs, Spain is racing against its neighbours Germany and France to overhaul supply chains and retool its facilities for the production of EV parts. A planned Tesla ‘Gigafactory’ near Berlin – which was intended to open on 1 July – is facing delays due to regulatory hurdles and some environmental opposition to the project.

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