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Volkswagen is putting on hold a planned battery plant in eastern Europe and prioritising a similar facility in North America after estimating it could receive €10bn in US incentives.

The decision is the latest fallout from Joe Biden’s $369bn package of subsidies and tax incentives for green technology that is luring European companies to the US.

Europe’s largest carmaker told EU officials last week that it expected to reap €9bn-€10bn in subsidies and loans from the US president’s Inflation Reduction Act and other US schemes over the lifetime of the factory, according to people at the meeting.

VW was “waiting” to see how the EU would respond to Washington’s incentives before pressing ahead with a plan to build a plant in eastern Europe, said one person with direct knowledge of the decision making at VW.

“Plans in North America have moved forward faster than expected and overtaken decision making in Europe,” the person said.

The IRA has sparked panic among European policymakers as high-tech industries such as batteries, which they have spent years nurturing, look across the Atlantic as competition from China intensifies.

The European Commission, which will next week publish a Net Zero Industry Act as part of its response to the US green scheme, is looking to loosen rules on state aid and is reassessing whether to deploy EU-level subsidies. But an early draft outlined last week has fallen short, according to industry executives.

A senior executive at another European battery maker present at last week’s meeting, which took place in Brussels and that competition commissioner Margrethe Vestager attended, said: “It looks pretty bad. There was an absence of concrete measures.”

Another executive said: “We’ve been contacted by many US states and they all highlight the IRA. When we put the figures together, the conditions they offer are much more interesting than the conditions they offer in Europe.”

VW said no decisions had been made on the locations of its plants in North America or Europe and it was committed to its plan to build more cell factories in Europe. “But for this we need the right framework conditions. That is why we wait and see what the so-called EU Green Deal will bring,” the company said.

Battery maker Northvolt, which also attended the meeting, suggested it could choose the US over Germany when deciding the location of its next gigafactory unless Brussels gave more concrete support, according to people with knowledge of the discussions. Northvolt estimated it would be able to receive more than €8bn in US subsidies for one factory, they said.

Northvolt declined to comment.

VW is making “much faster progress” with battery factory plans in North America compared with Europe, Thomas Schmall, head of VW’s components unit, wrote on LinkedIn after attending the meeting in Brussels. Europe was at risk of losing out on “billions of investments that will be decided in the coming months and years”, he added, calling for a European public state aid programme and lower prices for green energy.

Lobby group Transport & Environment warned this week that more than two-thirds of European battery projects were at risk of being cancelled, delayed or cut back.

VW, which has gone beyond most other carmakers to secure increasingly volatile supply chains by announcing plans to not only assemble batteries but also manufacture cells, said two years ago that it would build six gigafactories.

Arno Antlitz, VW’s chief financial officer, last week said the carmaker “would have done [a North American battery plant] anyway”, but that the new subsidies accelerated its plans.

“The IRA gives us a tailwind in terms of speed and consequence, so we have the possibility to enlarge our global footprint even faster in the US with the IRA.”

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