Volvo may be eying to shift its investments to the United States

Volvo AB has joined a growing list of automakers concerning shifting holdings to the United States if Europe does not increase aid in response to Joe Biden's historic green subsidy push.

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According to Volvo CEO Martin Lundstedt, the Inflation Reduction Act, which promises roughly $370 billion in clean-energy subsidies, will significantly increase the requirement for emissions-free trucks in the United States.

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"If nothing happens in Europe, we'll have to think about where we're going to put the initial investments to scale up capacity for some of the value chain technologies," Lundstedt said in an interview. "This is not a threat; it is being driven by customer demand, and volumes will increase."

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The IRA has bolstered fears that Europe will fall behind in the race to modernize sectors as costs in the region rise. Northvolt AB of Sweden announced in November that it is considering postponing its planned factory in northern Germany in favor of investing first in North America.

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Last week, the European Union proposed its own green-tech road map in order to keep industries cost-effective- effective and catch up with the United States and China. However, its plan, which European leaders will debate this week, has been met with mixed reactions, with some worried that the subsidies will only benefit richer countries and others warning of a transatlantic trade war.

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Volvo is working to develop trucks that utilize batteries, hydrogen, and renewable fuels and is expanding related infrastructure. Together with Daimler Truck AG and Volkswagen AG's Traton, the Swedish company intends to invest €500 million ($539 million) in the coming years to set up at least 1,700 heavy-duty vehicle chargers across Europe.

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Lundstedt believes that any updated European green-technology push will send a clearer message about the region's commitment to charging infrastructure, battery factories, and zero-emissions vehicular procurement incentives.

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"What they had previously communicated did not have the same strength as the IRA," he said. "If we don't get an equitable package in Europe, demand will increase quicker in North America."

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The US would cover $45 per kilowatt-hour of a battery's production costs under the IRA, an aid that "will absolutely change the equation for clients" and potentially also for Volvo, according to the CEO.

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With Volvo accounting for 30% of North American revenue and demand expected to rise due to the IRA, building its next battery plant there "wouldn't be a surprise," he said.