Elon Musk-led Tesla Inc. TSLA has decided to focus its cell production in the U.S., despite assembling battery systems at its Germany plant.

What Happened: In light of tax incentives under Inflation Reduction Act, or IRA, Tesla shall focus its cell production within the U.S., stated a Reuters report. U.S. President Joe Biden‘s IRA provides $374 billion in support of green-tech.

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Tesla will now scale down battery cell production at Gigafactory Berlin-Brandenburg, its first manufacturing location in Europe.

“The focus of Tesla’s cell production is currently in the United States due to the framework created by the United States Inflation Reduction Act (IRA),” Reuters reported, citing a Tesla spokesperson.

Why is it important: European authorities have expressed concerns that the new U.S. laws might reduce the interest of EV companies in manufacturing hubs like Germany. The European Commission is now considering providing similar subsidies for green-tech, in line with the U.S.

Tesla has long been striving to increase its own battery cell production. Last month, Tesla announced an investment of $3.6 billion for expansion of its cell factory complex in Nevada.

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