Is the European Union finally challenging Asia’s dominance on battery cells production? French battery cell manufacturer Saft and Opel, the German subsidiary of automaker PSA Group, are finalising the details of a major investment project in battery cell manufacturing. Back in 2017, the European Commission warned about the serious risk for Europe to become irreversibly dependent on battery cells imports.
This segment is currently dominated by East-Asian competitors, with Panasonic (Japan) and LG Chem (South Korea) being top manufacturers for the automotive market, closely followed by Samsung SDI (South Korea), CATL (China) and SK Innovation (South Korea). If European stakeholders do not react swiftly and join forces to build a competitive battery value chain, catching up with Asian incumbents will become impossible. Therefore, the starting point of the European Battery Alliance (EBA) was to recognize that the whole value chain – from raw material supplies to battery recycling – was of strategic interest for the EU.
Hence, all existing tools should be used in a coordinated way to create an enabling environment, foster cooperation initiatives and facilitate investment decisions. This is a wide-open game and EU member states need to take a much more active stance in the promotion of EU-made battery cells, including through the provision of public finance. Despite the EU’s efforts, the wait-and-see approach has so far prevailed, but things may be about to change.
In this respect, the European Battery Alliance has set a target of 200 GWh/yr manufacturing capacity to be available in the EU as of 2025, while others believe the European EV market will need 500-600 GWh/yr by 2030, or at least ten gigafactories of the size of the one developed by Tesla-Panasonic in Nevada. These estimates confirm that there is room for many foreign and European investment projects to go ahead, hopefully covering the highest number of member states.
Targeting an “Airbus for batteries” or an exclusively European battery industry is not the way forward. Global automakers serving the European market may decide to partner with European cells manufacturers. Conversely, EU car makers may favour non-European incumbents, while playing a more active role through the establishment of joint ventures. On the other hand, the European Battery Industry must take the lead in designing and producing the most environmentally-sustainable and ethically-responsible products, while ensuring that the highest recycling rates possible are achieved.
Last, but not the least, it is important to acknowledge the limits of the EBA’s “bottom up” approach and to go back to the fundamental debates around EU industrial policy and the strategy vis-à-vis China. Without a fair access to the booming Chinese market, which represents more than half of the global EV market, European companies are bound to struggle in the global EV competition – and this is ultimately a major weakness of the EBA. The EU should not wait for a hypothetical reform of the World Trade Organisation and explore alternative options to remove unfair barriers to overseas markets in general, and China in particular.
‚The European Battery Alliance is Moving up a Gear‘ – Policy Paper by Carole Mathieu – Institut français des relations internationales / IFRI.