This archive report was first published on 25 July 2021.
With the European Commission's announcement to ban new petrol and diesel vehicles by 2035, the continent is shifting towards electric cars at an unprecedented pace. By 2025, Germany's Daimler will launch only electric vehicle platforms, and by 2030, it will shift to fully electric cars.
Electric car sales have doubled their market share in the second quarter of 2021, according to European data. To meet this demand, Europe needs to accelerate its domestic battery output, not just as a national security issue but also as a boost for businesses and jobs.
Currently, batteries are mostly produced in Asia, with China, South Korea, and Japan leading the manufacturers. However, with the planned investment of €40 billion in 38 European factories, Europe is set to become a significant player in the battery production space.
One initiative is Sweden's Northvolt, which is building a factory that will produce batteries with a total capacity of 150 gigawatt hours by 2030. Volkswagen is a major partner, and the German carmaker is seeking to build five other factories as well.
Stellantis, which includes 12 brands, plans to build five factories in Europe and North America. Tesla expects to open its first European 'gigafactory' near Berlin later this year, which will be the world's largest battery cell production site with 250 gigawatt hours of capacity in 2030.
However, not everyone shares the optimism. Automotive analyst Olivier Montique from Fitch Solutions believes that the planned facilities will not enable Europe to meet its internal demand for EV batteries. As a result, automakers are still working with Asian battery makers.
Raw materials are essential for manufacturing batteries, and car batteries currently use lithium-ion technology. Europe has domestic sources of lithium, but it will also likely have to depend on imports. To reduce the threat of shortages, Europe may develop supply agreements with markets where there are abundant resources, favourable diplomatic ties, and strong investment frameworks.
