Ready to Scale: Europe Will Have Enough Cells to Meet Demand and Grow Its Domestic Battery Value Chain Industry
September 30, 202612 minutes
Transport & Environment (T&E)
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Made-in-EU requirements for all battery components would secure cell demand and investments in midstream production.
New analysis on the feasibility of cell and cathode requirements¹, finds that by 2030 sufficient amounts of Made-in-EU cells will be available for the IAA scope — including corporate and private EVs falling under a subsidy or tax scheme. As negotiations on the Industrial Accelerator Act (IAA) reach a critical stage, T&E analysis directly contradicts recent claims by the car industry about local content criteria being too ambitious.
Europe has a strategic opportunity to build a homegrown battery industry. However, scaling the EU battery sector is highly sensitive to demand certainty. Immediate targeted support is critical to compete with an influx of Chinese battery imports, which face virtually no tariffs. Local content requirements for cells and cathode active materials could mean an additional 34% in EU battery demands compared to the current baseline in 2027.
T&E’s analysis shows that the EU can deliver sufficient cells to power all EU manufactured BEVs that fall under the scope of the IAA — corporate and private cars in receipt of public support — under the condition that all projects materialise, including medium confidence ones.
Xavier Sol, Director Sustainable Investments and Batteries at T&E, said: “The future of European industrial competitiveness hinges on a simple question: will high value clean tech jobs come to Europe or remain in Asia? A strong local battery value chain can deliver strategic independence and safeguard employment during a vulnerable period for the EU automotive sector, but a powerful political signal via the IAA is required to unlock this potential and de-risk private investments.”
The bottleneck in the European battery supply chain are midstream components: cathode active materials (CAM) and their precursors (pCAM). These are assembled into cells along the production chain. China dominates global pCAM and CAM production for lithium-ion batteries, controlling up to 90% of global production capacity depending on the chemistry (and even higher for LFP with 95%). The EU battery industry still struggles with clear offtake commitments and additional investments in CAM and pCAM facilities.
A new T&E map, tracking capacity for cell and pCAM/ CAM production across the continent, shows what is at stake, and just how much potential there is in Europe. CAM and pCAM facilities require large, stable offtake agreements with European cell producers, which in turn depend on a robust and predictable EV market. CAM requirements for corporate vehicles in the IAA are feasible but additional capacity is needed to fulfill demand from private vehicles. Similarly a minimum Made-in-EU threshold of pCAM to be met with trusted partners should be added to the IAA, as this is the most vulnerable segment of Europe’s value chain.
“Recent years have shown that, unfortunately, a strong European battery value chain won’t build itself — the competition from Asia is simply too large. Without smart demand-side rules for locally produced battery components, Europe risks its qualification in the race for clean tech. Building a secure, local value chain can ensure security of supply, create jobs and economic resilience,” Sol concludes.
Before the IAA comes into effect, Europe’s “Made in Europe” agenda will face its first real credibility test, with local content rules for EVs in the EU-UK Trade and Cooperation Agreement, due to come into force in January. However, carmakers are once again lobbying for a last minute delay. Made-in-EU depends on the credibility of EU rules. As this is now tested the EU must stand firm.
¹ Under current Commission proposal, battery components for corporate vehicles would have to be made within the EU, while private subsidised cars could be made with FTA partners. Key assumptions of the T&E analysis include: IAA covers light-duty EVs (including vans), EU cell production includes LFP and NMC projects, ratio between private and corporate channels remains as today, and cell demand includes EVs already using EU cells, with additional cell relocation for eligible EU-assembled EVs. Assumptions on production ramp up are voluntary pessimistic.
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