A report by the European Court of Auditors (ECA) shows that the European Union risks falling behind in its efforts to become a global battery driver.
Officials from the European Court of Auditors (ECA) have published a report concluding that “EU industrial policy has been effectively promoted in recent years. But access to raw materials remains a major impediment, along with rising costs and fierce global competition. As a result, the EU’s efforts to develop its battery production capacity may be insufficient to meet growing demand, which means the EU risks missing its 2035 target of zero emissions.”
Specifically, according to the ECA report, with almost one in five new cars registered in the EU in 2021 charging from an electric socket (BEV + HEV) and the sale of new petrol and diesel cars to be banned from 2035, batteries have become a strategic imperative for the EU.
But according to ECA, the battery industry in Europe has lagged behind its global competitors, notably China, which covers about 76% of the world’s production capacity. In a bid to revive the EU’s efforts to become a global battery industry driver, the European Commission published a Strategic Battery Action Plan in 2018. The Commission has also largely put in place the most important instruments in this plan to support the sector, including providing the necessary strategic leadership, legislation and funding.
Between 2014 and 2020, the battery industry received EU grants and loan guarantees worth at least €1.7 billion, in addition to state aid worth up to €6 billion authorised between 2019 and 2021, mainly in Germany, France and Italy. However, the auditors found that the European executive (EC) lacks an overview of total public support to the industry, which limits its ability to ensure proper coordination and targeting.
The EU’s battery production capacity is growing rapidly and, according to some estimates, could increase from 44 GWh in 2020 to 1,200 GWh in 2030. If the 1,200 GWh target were reached, up to 16 million electric cars could be equipped with 75 kWh batteries. However, the auditors of the European Court of Auditors consider that this forecast is by no means guaranteed and may be jeopardised by geopolitical and economic factors.
First, battery manufacturers could abandon the EU in favour of other regions, especially the US, which offers strong incentives. Unlike the EU, the US directly subsidises the production of minerals and batteries, as well as the purchase of electric vehicles, as long as they and their components are made in the US.
Secondly, the EU is particularly dependent on imports of raw materials, especially from several countries with which it has no trade agreements: 87% of its imports of crude lithium come from Australia, 80% of its manganese imports come from South Africa and Gabon, 68% of its crude cobalt imports come from the Democratic Republic of Congo and 40% of its crude natural graphite imports come from China.
Although Europe has more mineral reserves, the time from discovery to production is at least 12 to 16 years, ECA notes, making it impossible for the EU to respond quickly to rising demand. However, current contractual arrangements generally only ensure the supply of raw materials for two to three years of term production. In March this year, the European Commission put forward a proposal on critical raw materials in response to this situation, the auditors note.
Third, the competitiveness of EU battery production could be jeopardised by rising raw material and energy prices. At the end of 2020, the cost of a battery pack (€200/kWh) was more than double the planned target value. In the last two years, the price of nickel has risen by more than 70% and lithium by 870%.
Unclear EU strategy
The auditors also criticise the lack of quantified and time-bound targets. Around 30 million zero-emission cars are expected to be in operation on Europe’s roads in 2030, and eventually almost all new registrations from 2035 onwards will be battery electric vehicles. But the current EU battery strategy does not assess the battery industry’s ability to cope with such demand.
“The EU must not end up in a position of dependency as happened with natural gas. Its economic sovereignty is at stake. With its plan to stop selling new petrol and diesel cars by 2035, the EU is betting big on batteries. But they are likely to face problems in terms of access to raw materials, attractiveness to investors and costs,” says Annemie Turtelboom, Member of the European Court of Auditors.
Overall, the auditors warn of two possible worst-case scenarios if the EU’s battery production capacity does not grow as projected.
In the first scenario, the EU may have to postpone the ban on the sale of internal combustion engine vehicles beyond 2035, thus failing to meet its carbon neutrality targets.
In the second scenario, the EU would have no choice but to rely heavily on batteries and electric vehicles manufactured outside the EU, at the expense of the European car industry and its workforce, in order to achieve a zero-emission fleet by 2035.
Few charging points
In 2021, the European Court of Auditors published a report on European charging infrastructure for electric vehicles, which concluded that the EU is still far from reaching the Green Deal target of one million charging points by 2025 and lacks a comprehensive strategic roadmap for electromobility.
The VDA (German Association of the Automotive Industry) is also sounding the alarm that there are still too few public charging options for electric vehicle drivers.
Hildegard Müller, President of the VDA, believes that the German and EU objectives are “technically outdated”.
“In order to reach the target that has been set (n.n. – 1 million in Germany alone by 2030), the rate of expansion in the last twelve months would have to be four times higher,” says Hildegard Müller, who also notes that there are currently only about 90,000 public charging points in Germany.
However, it also takes into account the fact that the new stations installed are increasingly efficient, offering higher charging speeds. This would allow significantly more vehicles to be charged at a charging station per day than before.
These two issues – the slow pace of development of battery production facilities and insufficient charging stations – could seriously hamper the expansion of green transport in Europe and even jeopardise the EU’s goal of only allowing electric vehicles to be sold from 2035.
