The technological revolution in electric vehicles has provided a rare opportunity for some East Asian countries to overtake certain traditional European automotive powerhouses in the past. However, considering the current situation where East Asian suppliers almost dominate one of the core markets in the electric vehicles era, namely electric vehicle (EV) batteries, Europe is rapidly strategising to develop its domestic EV battery industry. Leveraging various technological advantages accumulated during the era of internal combustion engines and necessary policy support, Europe seeks to regain at least autonomy in the domestic EV battery production and endeavours to participate in the future global competition within the EV battery sector.
A general picture of Today’s EV Battery Market
Let’s start with three fundamental questions about the EV battery industry if you are a die-hard fan of gas-powered car and this marks your first foray into the world of electric vehicles and their pivotal component — the EV battery.
- What percentage of the total cost of an electric vehicle is attributed to the EV battery? Basically, the EV battery, being the most crucial component of an electric car, can represent up to 30-40% of the total manufacturing cost of an electric car.
- What’s the percentage of the market share owned by East Asian EV battery suppliers? As of 2022, the top 10 players in this market are all East Asian manufacturers (China, S.Korea and Japan). Collectively, they account for more than 92% of the global EV battery market share.
- How rapidly is Europe transitioning from traditional energy-powered cars to electric cars? In 2022, Europe secured the second global position in EV sales, holding a 22% share and surpassing the U.S. at 9%, as reported by KPMG. According to the European Automobile Manufacturers’ Association (ACEA), the share of EV cars is expected to reach almost 30% of the European car market by 2025 and to exceed 70% by 2030, which means three out of every five cars in Europe will be electric cars by then.
Timeline of Europe’s pursuit of EV battery independence
As early as 2017, the European Commission initiated the establishment of the European Battery Alliance (EBA) to promote cooperation in the local industrial chain. The EBA, currently has over 750 members, covering the entire value chain of power batteries, financial institutions, and government departments. As a semi-official ecological alliance, the EBA accelerates the incubation of emerging European battery factories such as Northvolt, Verker, ACC, Freyr, etc.
The European Commission also approved two “Important Projects of Common European Interest (IPCEI)” for the battery industry in 2019 and 2021, providing €6.1 billion in public funding to support the technological research and development as well as capacity construction of power batteries.
Since 2022, the EU has enacted the “Net Zero Industry Act,” “The Critical Raw Materials Act,” and “Regulation of the European Parliament and of the Council Concerning Batteries and waste batteries” specifying power battery manufacturing shares should be reserved in the EU. These enactments have elevated industry standards and carbon footprint disclosure requirements. The ongoing implementation of the “Carbon Border Adjustment Mechanism (CBAM)” will further raise the import threshold for European power batteries, emphasising the growing cost-effectiveness of local manufacturing.
Under the impetus of these policies, Europe is witnessing a new wave of investment and factory building in EV batteries. For example, the Franco-German automotive battery production company ACC announced the completion of its “Gigafactory” in the Dunkirk Industrial Zone in northern France. The facility is set to commence operations before the year-end, with an initial capacity exceeding 13 gigawatt-hours. This marks the completion of France’s first domestic electric vehicle battery production plant.
In addition to government-backed EV battery companies, some legacy carmakers are also accelerating their electrification process through investing in EV battery factories. For example, the Volkswagen Group increased its investment in the field of clean energy in Spain from 3 billion euros to 10 billion euros, including the production of electric vehicles and EV batteries.
Is EV battery really a market deserve for European governments and companies to break into?
Despite Europe having established a long-term strategy in the field of EV batteries, the intense competition in the EV battery sector may lead to a significant future reduction in manufacturing costs and profits. This situation prompts the European EV battery and automotive industry to reconsider whether it is worthwhile to invest heavily in this area.
As of now, in the five major segments of the EV battery industry chain, including power batteries, positive electrode materials, negative electrode materials, electrolytes, and lithium-ion separators, the production capacity plans of companies have far exceeded the upper needs predicted by third-party research institutions for market demand by 2025. Many core segments of the industry chain have already shown signs of the risk and pressure of overcapacity, and it seems inevitable that severe overcapacity will occur within the next few years.
This trend can be seen in the recent layoffs and investment downwards in other regions of some key EV battery producers. LG Energy Solution, a top EV battery producer with partnerships in the US, is laying off 170 workers, which accounts for 10% of its Michigan plant employees. SK On, another Korean battery maker linked with Ford, is placing workers on furlough in Georgia due to reduced production.
Europe’s clear advantages as traditional automotive powerhouse amidst the shift towards reduced reliance
Europe possesses a distinct advantage in developing its domestic EV battery industry: thanks to the unparalleled brand strength accumulated by European car brands over nearly a century. As Europe’s automotive brands solidify their position in the era of clean energy vehicles, these brands are highly likely to opt for batteries from local EV battery factories within Europe instead of importing from overseas. In fact, a significant portion of these batteries may even originate directly from jointly invested EV battery facilities.
As we mentioned before, Volkswagen, in addition to establishing its own EV battery cell company and constructing standardised electric battery factories in multiple locations, has integrated relevant assets and formed a joint venture with Northvolt. Also Renault has acquired shares in the French EV battery company Verkor, while Stellantis, TotalEnergies, and Mercedes-Benz have jointly established the EV battery company ACC. In early 2022, Northvolt also announced the formation of a joint venture EV battery factory with Volvo in Gothenburg, Sweden. All of the acts above show a clear corporation and collaboration trend between the European traditional car brands and EV battery factories alongside the preference towards the local plants in supply chain development.
The last window of opportunity: East Asian manufacturers resist market handover
In the face of Europe’s goal to achieve complete autonomy in EV battery production by 2025 and the limited window of opportunity, EV battery companies from East Asia are making various efforts to establish a long-tern presence in the European market.
Taking Contemporary Amperex Technology Co. Limited (CATL), currently the world’s largest EV battery manufacturer, as an example. It has been consistently expanding its presence in the European market in recent years. CATL’s first overseas factory in Germany city Erfurt, with a planned capacity of 14 GWh, mainly serves BMW. The factory has achieved mass production of lithium-ion battery cells, indicating that CATL now has the capability for localised production and supply to European customers. CATL’s second European factory in Hungary, officially started operations in September last year, with a planned capacity of 100 GWh, and Mercedes-Benz is its first and largest customer. CATL expects that by the end of 2023, the combined capacity of the two European factories will reach 180 GWh.
The second-largest EV battery manufacturer, South Korean company LG Energy Solution (LGES), is targeting a global production capacity of 520 GWh per year by 2025. In line with its expansion strategy, LG Energy Solution plans to establish long-term agreements and enhance strategic investments in raw material suppliers, including lithium, nickel, and cobalt. This approach aims to guarantee a stable supply chain and maintain competitive pricing. In Europe, LG Energy Solution is set to boost the production capacity of its Wroclaw plant in Poland from the current 70 GWh per year to 115 GWh per year by 2025.
The pace and approach of Europe’s development of the EV battery industry once again reflected Europe’s consistent approach in recent years when facing technological revolutions and energy crises. Specifically, a contradictory dual feature emerges, characterised by an unpreparedness for the swift transformation of industries prompted by technological revolutions. Nevertheless, concurrently, there exists a firm determination over the long term to tackle energy independence challenges and realise autonomous industrial development in certain sectors.
From this perspective, the efforts made by Europe today for the independence of the EV battery industry represent a crucial step towards success. Simultaneously, producers of EV batteries in East Asia must set their sights on more distant emerging markets. As European EV battery factories gradually catch up with the world’s production pace and European traditional automotive companies deepen their collaboration with local EV battery enterprises, the future battleground of the EV battery industry is bound to shift to other emerging countries lacking autonomous production capabilities. In these arenas, leading East Asian EV battery companies will meet with their European competitors that possess a legacy in car manufacturing and benefit from a latecomer advantage in this electric car era, which is a special combination may promise a late coming but bright future.
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中国新能源汽车筑梦欧洲, Jun 2022, KPMG China, Available at:
Volkswagen Group and SEAT S.A. to mobilize 10 billion euros to electrify Spain, May 2022, Volkswagen Group News, Available at:
South Korean EV battery makers lay off workers and scale back investments in US, Nov 2023, Financial Times, Available at:
Volvo Cars and Northvolt accelerate shift to electrification with new 3,000-job battery plant in Gothenburg Sweden, Northvolt Newsroom, Feb 2022, Available at:
https://northvolt.com/articles/northvolt-volvo-gigafactory/#:~:text=Volvo Cars and Northvolt have selected Gothenburg, Sweden, to establish,of approximately SEK 30 billion
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