The electric vehicle and energy company is building a manufacturing plant in Grünheide, outside of Berlin. The EU was prepared to approve funding worth over one billion euros as part of the second European battery cell programme (IPCEI).
But Tesla announced on Friday that it would not be taking the money, the German Government announced.
A spokeswoman for the German Government told Der Tagesspiegel on Friday: “The aid for the project in Grünheide had been approved by the European Commission.”
On top of this, the German Government recently committed to contributing 120 million euros to the fund.
But according to the Financial Times, Tesla was forced to turn down European subsidies after delays to its battery plant project breached a condition of the funding.
The EU requires all sites in receipt of its funds to be the “first industrial deployment” of the technology.
But delays caused in part by legal challenges means Tesla is likely to begin producing the batteries elsewhere sooner, in breach of the funding agreement.
In May, Tesla Chief Executive Elon Musk blamed delays to the production of the plant outside of Berlin on EU red tape.
He said: “I think there could be less bureaucracy, that would be better.”
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Germany’s Federal Ministry of Economics, quoted in Der Tagesspiegel, said that Tesla’s decision shows “Germany is an attractive investment location and that foreign investors are investing in Germany and Brandenburg”.
It added: “The Government funds not used by Tesla are now available for other projects.”
It is estimated that around 2,000 jobs will be created within the battery cell factory.
The factory’s production is part of Tesla’s aim to make 20million vehicles every year by 2030.
The company produced just oner 500,000 vehicles in 2020.
Additional reporting by Monika Pallenberg.