Why France is Europe's foreign direct investment champion
July 13, 2023
One area of Douvrin Billy-Berclau in France's northernmost department of Hauts-de-France is teaming with people. They are working to finish the first of three huge hangars, to be used when the country's first so-called battery giga-factory is completed here.
The €3 billion ($3.3 billion) project, called ACC, or Automotive Cells Company, is one out of many examples of recent foreign direct investment in France: 1,300 such plans were announced last year. But while they've been flaunted to the public, the overall economic impact is thus far limited.
"Right now, we're getting all our batteries from Asia – from China, South Korea and Japan. But we want to create our own industry to design, produce and sell batteries that are 100% made in France," Matthieu Hubert, ACC's General Secretary, told DW, while walking around the construction site on a recent Wednesday morning.
The factory, owned by a consortium consisting of european Automaker Stellantis, German carmaker Mercedes and French energy giant TotalEnergies, will one day yield battery cells for up to 500,000 vehicles per year and employ around 2,000 people.
Low energy costs from nuclear lure business
The joint venture is also planning to construct similar giga-factories in Germany and Italy. But the consortium has good reason to locate its first mega-project in France.
"France has highly qualified engineers and technicians and a real industrial culture," Hubert explained. "And the country has an enormous advantage compared to neighbors such as Germany: cheap nuclear electricity."
France's nuclear reactors produce roughly 70% of the country's electricity. And the government plans to construct at least an additional six nuclear power plants.
Neil Bernard, Director for Public Affairs, Market Access and Communication at Italian pharmaceutical company Chiesi, adds another argument in favor of France.
"French authorities have always been proactively supporting us in our projects – we really feel welcome here," he told DW, describing the country as "strategic territory" for the company.
Outside Italy, France is the only European country where the Parma-based multinational has subsidiaries – an R&D office in Bois-Colombes near Paris and a production site in La Chaussée-Saint-Victore in central France.
Chiesi now plans to expand the latter. The company will invest €60 million until 2026 and increase the number of employees there from 170 to 300.
French government strives to revitalize economy
The government support Bernard mentions is also a decisive factor for Germany's Vorwerk, which put down roots in France 50 years ago.
The Wuppertal-based company, known for its kitchen machine Thermomix, is currently constructing a second French production in Donmar in the northern region of Centre-Val-de-Loire. The original facility, called Vorwerk Semco, is located in Cloyes-les-trois-Rivieres, 150 kilometers (93 miles) south of Paris.
"We know the government is pro-business and aims to re-industrialize France, which we appreciate," Sebastian Weber, general manager at Vorwerk Semco, said to DW.
"What's more, the country has a very good infrastructure and highly skilled workers," he added.
Vorwerk will recruit another 74 such workers for the new facility, which aims to be up and running by the end of 2024.
Experts question true impact of investment
President Emmanuel Macron has indeed carried out a number of pro-business reforms, underlined Olivier Becht, Minister Delegate for Foreign Trade, Attractiveness and French Nationals Abroad.
"We have reduced corporate taxes from 33 to 25%, made our labor law more flexible, cut red tape and provided additional land slots to investors," he explained to DW.
Foreign direct investment is a boon to the economy, Becht stressed.
"Such projects created 58,000 jobs in 2022. The economy expanded by 2.6% last year and will continue to grow this year, whereas countries such as Germany entered into recession," he said.
But while foreign direct investment is good news for the country, it's hardly the reason behind seemingly positive changes to France's economic results, chief economist at BDO Consultancy Anne-Sophie Alsif says.
"Unemployment has gone down from 10% to roughly 7% within a few years, because our population is aging and there are less people available for work," she told DW.
Businesses have also been receiving subsidies to soften the economic impact of the Covid-19 epidemic and the war in Ukraine, she added.
"That's why they could invest that money, which led to growth," she said
ACC wants to develop France's "battery valley"
Still, in the region of Hauts-de-France, the giga-factory is likely to be received with cheers.
The traditional car industry employs more than 50,000 people here. But because the EU has banned the sale of petrol and diesel cars beginning in 2035, many of them will have to find new jobs.
ACC's Hubert is hoping some of these workers will join his company.
"We want to quickly be fully operational. Our factory will be part of a whole battery ecosystem in this valley," he said.
This ecosystem will also include at least three other battery giga-factories.
The companies, together with their supply chain, could add up to 10,000 jobs in what France is already calling its battery valley.
Edited by: Kristie Pladson