Overview of the European Lithium Battery Industry

Figure 3. Battery cell existing (with green mark) and new capacities (with yellow mark) announced for 2030 in Europe

Source: SMM, Google Earth

Figure 4. Lithium battery capacity forecast (low-risk projects and current capacities) in Europe

Form 1. Typical projects and their subsidised status

Due to the various of barriers, several gigafactory projects are being put at risk of delay or even cancellation. According to the SMM analysis, about 41% of the planned capacity is at medium risk or high risk, as shown in the Figure 5.

In addition to those that commonly lead to a lack of better prospects for the project, the USA Inflation Reduction Act (IRA) also has a great impact on some projects in Europe. The bill provides uncapped subsidies to domestic producers and to producers using more than a certain percentage of raw materials from North America, which is stronger than similar incentives in Europe. As a result, some of the planned or even prepared lithium battery industry investment in Europe may be transferred to the USA.

Figure 6. Share of lithium-ion battery capacity, 2022 (GWh)

Europe, like most other countries, currently relies on Chinese lithium batteries and raw materials to meet the needs of the consumer market and local related industries. More than three-quarters of the world's finished lithium batteries are produced in China now. China's share of other raw materials, such as graphite, is also as high as 74% (2022). Large-scale production capacity brings strong cost competitiveness; thus China's price is the lowest among the reasonably low prices of lithium batteries in different regions of the market. This lower price and the existing capacity advantage constitute great competition for the European growing industry.

Figure 7. Reasonable lowest price per kWh of lithium batteries in 2022 in China, USA & Euro

European Federation for Transport and Environment expects that the EU will be able to move away from its dependence on China for lithium-ion batteries and some intermediate raw materials by 2027 or later, thanks to the relevant bills. The newly introduced Critical Raw Materials Act also gives many battery industries a single source country percentage cap for raw materials. This is a key step in the EU's attempt to autonomise the whole industry chain, only whether this will lead to a further rise in costs and a weakening of product competitiveness remains to be seen over a longer period.

Conclusion

The future of the European lithium battery industry is facing both major opportunities and challenges. It is key to the EU's transition to renewable energy and away from fossil fuels. Although the EU's current production capacity is small, especially compared to China, it is seeing growth potential through various acts and policy drivers. However, the industry suffers from barriers such as a scarcity of local technology companies, underinvestment, delays, and geopolitical and regulatory challenges. The global competitiveness of European lithium battery industry has no edge compared to other first-mover competitors. European countries must effectively balance policy support, investment incentives and sustainable development practices to promote the competitiveness and co-operation of local industries.

In addition, for those investors from overseas, it is crucial to focus on integration with local industries and linkage of interests. When investing in a location, it is crucial to demonstrate the advantages of the investment to the local community and to establish a partnership based on sharing these benefits. This approach of integrating the interests of both the investors and the local community can be instrumental in addressing any concerns or scepticism that may arise beyond the technology and market dynamics. Often, this strategy proves to be a decisive factor in the success of a project.