Can Europe keep up in the global EV battery-building race?

16 March 2023


As vehicle electrification transforms automotive production processes, companies are analysing the best location to manufacture key components. Autovista24 editor Tom Geggus considers the future of electric-vehicle (EV) battery building in Europe.

Batteries are a key component of EV production. Their technological development, material sustainability and supply chains are all areas of industry interest. Therefore, where batteries are built draws constant attention as carmakers look to improve production processes and countries encourage localised manufacturing.

The reason for this is not hard to understand. In February, marketing and intelligence consulting firm P&S Intelligence announced that it expected the global battery technology market size to reach nearly $177 billion (€167 billion) by 2030. Standing at $101 billion last year, the growth is closely tied to the electrification of the automotive industry.

EV battery-building bases

Prior to Volkswagen (VW) Group confirming its next gigafactory will be in Canada, speculation was rampant about whether Europe would continue to see new battery sites. Thomas Schmall, member of the board of management for technology, confirmed a new plant in North America did not mean the carmaker would forget Europe. Instead, the company was waiting to see if the region would offer a response to the US Inflation Reduction Act (IRA).

He did highlight that the carmaker’s battery needs in Europe should be met up until 2028 by its three confirmed factories. This includes the Salzgitter plant in Germany, Northvolt’s site in Sweden and another in Valencia. While VW Group is still looking to produce 240GWh worth of cells on the continent, Schmall explained that this could be done with fewer than the originally planned factories.

In the UK, Recharge Industries purchased Britishvolt after it went into administration in January. Fears mounted that without a local battery manufacturing plant, EV production in the country would become ever more precarious. ‘The future of vehicle manufacturing in the UK is dependent on our ability to make EVs and to be able to export them to other markets,’ Andy Picton, chief commercial vehicle editor at Glass’s (part of Autovista Group) said at the time.

The European Association of Automotive Suppliers (CLEPA)’s deputy head of market affairs, Nils Poel, told Autovista24 that Europe’s battery manufacturing does face a potential risk, particularly the production of cells and battery chemicals. ‘Production costs for cells are estimated to be about $80-100 per kWh, but US subsidises operating expenses are only up to $35 per kWh of cells produced. Add to this lower electricity costs in the US, and the risk of EU investments in developing a deep battery supply chain being postponed becomes real.’

Europe’s industrial policy

Concerns over the region’s battery build capacity are not constrained to businesses. Analysis carried out by Transport and Environment (T&E) highlighted that 68% of Europe’s planned lithium-ion battery production is at risk of being delayed, scaled down or cancelled. Tesla’s gigafactory in Berlin, Northvolt in Northern Germany and Itavolt close to Turin, were identified as being at risk.

T&E found that a production capacity of 1.2TWh, equivalent to 18 million electric cars, is at high or medium risk of being disrupted or lost. Without this expansion, Europe would struggle to meet demand for batteries come 2030, turning instead to importing. This would lead to many knock-on impacts for the region.

‘Out of the around 250,000 jobs that could emerge in the EV supply chain by 2035, nearly 71% are linked to the manufacturing of batteries, battery cells and battery materials. Since a battery represents a significant portion of the value creation, it will serve as a crucial domain for innovation,’ said Poel.

‘Establishing a strong foundation in battery technology will also be important for other crucial EV technologies, such as thermal management and power electronics due to cluster advantages, making it imperative for the EU’s overall industrial competitiveness,’ he added.

Green industrial acts

An influencing factor in the possible movement of battery builders is the IRA’s enticing incentives, drawing companies to set up shop in the US. Recent talks between US President Joe Biden and European Commission President Ursula von der Leyen did appear to end positively. Both sides agreed to deepen cooperation on diversifying battery and critical mineral supply chains.

‘European battery manufacturers believe that cooperation, rather than competition, between jurisdictions is key to fight climate change, so we look very positively at recent news that the EU and the US are looking at cooperating on cleantech support. Policy alignment between regions of the world is indeed critical to providing a consistent regulatory framework for the overall battery value chain, which is intrinsically global,’ Giorgio Corbetta, EUROBAT’s EU affairs director told Autovista24.

Since the EU-US talks, the European Commission published two draft laws as part of the Green Deal Industrial Plan. The Critical Raw Material Act plots out how the bloc will ensure a supply of metals needed for batteries, as well as wind turbines and other green technology. Meanwhile, the Net Zero Industrial Act proposes the manufacturing capacity of net-zero technologies, such as batteries, approaches or reaches at least 40% of the Union’s deployment needs by 2030.

‘The Net-Zero Industry Act will provide a framework for net-zero technologies for businesses and society as they make the transition to a more sustainable future,’ said Margrethe Vestager, executive vice president for a Europe Fit for the Digital Age.

‘It will enable the development in Europe of projects in key sectors such as batteries, solar cells, hydrogen and wind turbines, as well as all other projects in the connected value chains. This will help us deliver on the Green Deal objectives whilst ensuring a level playing field,’ Vestager added.

Both the Critical Raw Material Act and the Net Zero Industrial Act will need to be agreed upon by the European Parliament and the EU Council before they are adopted. Both promise to positively influence production in Europe, and could even help keep the region in the EV battery-building race.