電車出海歐洲-歐洲關(guān)稅政策工具分析-2024-05-市場解讀

Toraiseornottoraise

HowEuropecanusetari?saspartofanindustrialstrategy

March2024

Summary

ThesalesofbatteryelectriccarsinEuropehavebeengrowingquickly,with2mlncarssoldacrossEuropein2023alone.ButgivenChina?sedgeinbatterytechnologyandsomefeetdraggingbyEuropeanlegacycarmakers,moreandmoreofthoseelectriccarsareimportedfromChina.TheEuropeanCommissionlaunchedananti-subsidyinvestigationintoChineseEVs.Withthepreliminaryrulingexpectedsoon,T&E?spaperislookingattheEVimportsintoEuropeandwhatane?ectiveresponseonbothEVsandbatteriesmightbe.

Thispaperispartofourworkonindustrialandtradepolicy.Europe?sgoalshouldbetodecarboniseasfastaspossiblebuttodosoinawaythatsafeguardsessentialeconomic,socialandsecurityinterests.DecarbonisationintheEUshouldnotmeandeindustrialisation,andtradepolicyhasakeyroletoplay.

19.5%ofallelectriccarssoldacrosstheEUlastyear,or300,000units,werebuiltinChina.InFranceandSpainclosetoeverythirdBEVsoldin2023wasmadeinChina.MorethanhalfofthosecomefromWesterncarmakers:28%ofallChinamadeEVswereimportedbyTesla,withRenault?sDaciaaddingafurther20%.ButtheChinesehomegrownbrandsarequicklycatchingup:from0.4%oftheEVmarketin2019to7.9%in2023.T&EprojectsthelikesofBYD,MGandotherscouldreach20%oftheBEVmarketby2027.

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Figure:ShareoftheEUBEVmarketimportedfromChina

ThisshowsthechallengeEuropeisfacing.Raisingthetari?stoatleast25%(from10%today)wouldmatchthetari?theUSoriginallyimposed.Basedonthecurrentaveragevehicleprices,itisexpectedtomakemediumcars(bothsedansandSUVs)importedfromChinamoreexpensivethanEUequivalents,whilecompactSUVsandlargercarswillremainslightlycheaper.Itwouldalsoraisebetween€3-6blninadditionalannualrevenue,mostofitfortheEUgeneralbudgetthatshouldbereinvestedintoscalinglocalcleantechsupplychains.TheUKshouldfollowsuitandadjustupwardsitsEVimporttari?s,whileagreeingaEuropeanbatteryalliancewiththeEUforatari?-freeEVsupplychain.

Tari?swillnotstopChinesecompaniesfrombuildingfactoriesinEuropeasBYDandCATLarealreadydoing.Norshouldgovernments?aimbetoshieldlegacycarmakersfrommeaningfulcompetitionorleadtoashrinkingo?erofa?ordableBEVsforEuropeanconsumers.TheaimshouldbetolocaliseEVsupplychainsinEuropewhileacceleratingtheEVpush,inordertobringthefulleconomicandclimatebenefitsofthetransition.Itisthereforecriticalthatahighertari?isaccompaniedbyaregulatorypushtorampupthemassmarketBEVplans,includinginthecorporatechannel,focusingonsustainableandmorea?ordableo?erings.

ButEuropeshouldnotstopatEVs.Tradepolicyshouldbecomeanintegralpartofamorestrategicgreenindustrialstrategy.Lithium-ionbatteriesareattheheartofthis:morethanEUR180blnhasbeeninvestedintotheEUbatteryvaluechain,predominantlygigafactories,todate.BillionsofstateaidhavebeencommittedtoprojectssuchasNorthvoltinGermanyandVerkorinFrance.Asa

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result,Europeisexpectedtosupplytwo-thirdsofthedemandlocallythisyearand,potentially,couldbecomeself-su?icientfrom2026onwards.

Butexecutingthiswon?tbeeasy:Chinamanufacturesoverthree-quartersofglobalcapacitywithpricesatleast20%lowerthaninEurope(thoughitisrumouredthatChinesebrandsgettheircellsatmuchhigherdiscounts).ChinesecompaniesareaheadofEuropeontechnologyandsupplychainpreparedness.ThegapwiththeUSissmallerbutmade-in-Americacellsbenefitfrom$45/kWhIRAsubsidies.

Atthesametime,theEUbatterycellimporttari?isthelowestcomparedtoChina(10%forEU)ortheUS(10.9%forChina),atamere1.3%currently.Withoutdecisiveprotectiveandsupportivemeasures,theEUbatteryindustryriskslosingouttoforeigncompetition.Therefore,ifitisEurope'sgoaltohavesignificantbatterymanufacturinginEuropeitwillneedtointroducemeasurestocreateapulltomanufacturelocally.Suchmeasurescaninclude:

-Strongbatterysustainabilityrequirementsthatrewardlocalcleanandcircularmanufacturing.ButthecarbonfootprintmethodologybeingcurrentlydevelopedunderthenewEUBatteryRegulationisnotsu?icientandlacksstrictCO2thresholds.

-Strong“MadeinEU”requirements.Butthecurrent40%targetintheNetZeroIndustryActlacksteeth.

Thisleavestari?s.Highertari?scanbedoneinawaythatdoesnotcauseatradewar.ManyChineseplayersarealreadyplanningbatteryinvestmentsintoEurope.Similartoprevioustradedisputes,anamicablesolutioncanbefound.Thiscanincludealowertari?uptoacertainvolumeofimports(e.g.10-15%ofthemarket)atanagreedminimumprice,withthehighertari?kickingina什erwards.Tocreateapullforlocalbatterycellmanufacturing,Europewouldneedtoincreasetari?stoatleast20%by2027toclosetheaveragecostgapwithChina(likelymore,somethingtheinvestigationshouldlookinto).Unlikesolar,Europeshouldactpreemptivelybeforeitistoolate.Thisshouldbeaccompaniedbystronger“MadeinEU”requirementsinpublictenders,subsidiesandEUgrantsandloansgiventoEVandbatterymakers.

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Figure:exampletari?proposal

Thereisarealriskthatautomotivejobsandknow-howwillleavethecontinentasEuropeanlegacycarmakershavebeenslowtotransitiontoelectric.TheaimofEurope?stradepolicygoingforwardshouldbetosecurelocalmanufacturing,ie“madeinEurope”,nottoshieldincumbentcompaniesfromcompetition.Tradeprotectioncangivelegacymanufacturerssomereprieve,butultimatelywhethertheysucceedorfailwilldependontheirbusinessstrategiesandabilitytocompetewithnewentrants,bothChineseandAmerican.Goingfaster,notslowingdown,istheonlywaytofendo?foreignimportsintoEurope.

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1.Introduction

TheEUandtheUKhaveputinplacepoliciestoprogressivelyincreasethesalesofzeroemissionvehicles(ZEV),largelybatteryelectric(BEV)inordertophase-outcombustionenginesfromnewcarandvansalesby2035.ThisisnecessarytoslashCO2emissionsfromlight-dutyvehiclestozero,oneofthesinglelargestsourcesofcarboninwesterneconomies.SuchpoliciesalsocreatecertaintyaroundtheBEVmarketinEuropeandsendastronginvestmentsignal,promptingdozensofbillionsworthofinvestmentintoEVproductionfacilitiesandbatterygigafactoriesalready.

However,givenChina?stechnologicaledgeinbatteryelectricvehicletechnologyontheonehand,andslowertransitionbyEuropeanlegacycarmakersontheother,theimportsofChinesemadeelectricvehicleshavebeensurginginrecentyears.ThisposesriskstotheEUautomotiveindustrialfabricevenifitdoesbringabetterandmorea?ordableo?ertoEuropeandrivers.

China?sascentinelectricvehiclesisatleastpartiallyattributabletogenerousgovernmentsubsidiesinallmannerofareas:taxreductionsonvehiclesandbatteryproduction,subsidiestolowerenergyandlandacquisitioncosts,aswellasanaggressivepolicytosecurebatterymetalsabroad.ThisisasimilarstrategyChinahasappliedinothersectors,e.g.solar.Toavoidwhathappenedwiththesolarindustry,theEuropeanCommissionhaslaunchedananti-subsidyinvestigationintoChineseEVsinSeptember2023.

ThispaperlooksintoChineseEVimportsinEuropeandanalysesthelikelydynamicsandimpactsofhigherEVimporttari?s.Itconsidersthepossibleadditionalrevenuefromsuchtari?s,aswellaslooksintoextendingthesebeyondelectriccarsonly.Ultimately,T&EpresentsthepolicyrecommendationsfortheEuropeanCommissionastheydeliberateaheadofthepreliminaryinvestigationresultsexpectedinearlysummer2024.

2.ChineseelectriccarimportsintoEurope

A什erasteepx5increaseinthesalesofelectriccarsbetween2019and2021,drivenbytheentryintoforceoftheEU2020/21CarCO2targets,theelectriccarmarkethasgrownmoreslowlyin2022and2023.Whilethestandardsremainthesameuntil2025(requiringonlyaminimalincreaseinambitionin2022-2024toaccountfortighteningflexibilities),thebatteryelectriccarsalesnonethelessgrewby28%in2022,andbyafurther37%in20231,witharound1.5mlnbatteryelectriccarssoldlastyearalone.Thisreflectsthegrowingconsumerdemand,aswellassmartincentives-notablyforcorporateregistrations-whichallowcountrieslikeBelgiumtoseeimpressivegrowth.

1ACEA,FuelTypesofNewCars2022and2023

https://www.acea.auto/fuel-pc/fuel-types-of-new-cars-battery-electric-12-1-hybrid-22-6-and-petrol-36-4-mark

et-share-full-year-2022/#:~:text=%25%20Petrol%2C%2036.4%25-,In%202022%2C%20registrations%20of%20new%20battery%20electric%20vehicles%20(BEVs),a%20market%20share%20of%2022.6%25.

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Figure1:BEVsalesinEurope

However,aquestiono什enposediswherethesebatteryelectriccarsareproduced:locallyinEuropeorimportedfromChina?Whenlookingatimports,onemightalsodi?erentiatebetweenelectriccarsbyChinesebrands(thatbenefitfromdecades?longstatesupportacrossthevaluechain)andelectriccarsbyEuropeanandAmericanbrandsthataresimilarlymanufacturedinChinatobenefitfromlowercosts(buttoasmallerdegree).

Overthepast4years,boththeshareofelectriccarssoldinEuropebyChinesebrandsandtheshareofEuropeanandAmericanbrandcarsproducedinChinaandexportedintoEuropehaveincreased.In2023,19.5%ofallEVsalesintheEU-or290,000units-wereimportedintotheEUmarket.

Figure2:ShareoftheEUBEVmarketimportedfromChina

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Untilrecently,theimportshavebeendominatedbywesternbrandsexportingthevehiclesfromChinaintoEurope,notablyTeslaandDaciabyRenault(asseeninthegraphabove).In2023,Teslaaccountedfor28%ofallChinamadeEVsimportedintoEurope,whileDacia?sSpringaddedanadditional20%.Unlessactionistaken,basedonGlobalDataforecast2,T&Eexpects296,000unitsbybyTesla,Renault,BMWandotherinternationalOEMs(Smart,VolvoandCupra)tobeshippedintoEuropein2024,ajumpof70%comparedto2023,duetotheincreasedproductionofmultiplemodelsinChinaincludingtheVolvoEX303,theMiniCooper4,theSmart#35ortheCupraTavascan6.In2025,theimportsareexpectedtobeafurther340,000units,representing12%oftheBEVmarket.

Ontheotherhand,theChinesebrandsgrewfrom0.4%oftheEuropeanBEVmarketin2019to7.9%overthefull2023,orbyafactorof20.Theycontinuetogrowandareexpectedtoreach8.1%ofallEUBEVsalesin2024(168,000units)and8.5%in2025(243,000units)basedonGlobalData?sforecast.Assumingalineargrowthinmarketsharebasedonthelasttwoyears,T&EprojectsthatChineseOEMsalonecouldevenreach11%oftheEVmarketin2024,14%in2025and20%in2027.

Figure3:ForecastofBEVsalesfromChinesecarmakersintheEU

2EstimatesbasedonGlobaldata?sgloballightvehiclesproductionforecast,andtheirglobalhybridandelectricvehiclessalesforecast(Q32023)

3

/volvo-ex30-everything-we-know/

4

/automakers/bmw-shi什-uk-production-electric-mini-china

5

/shanghai-auto-show/2023-shanghai-auto-show-smart-3-joins-revamped-lineup

6

/2023/12/30/vw-anhui-starts-production-cupra-tavascan-export-europe/

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CurrentlyMGistheleadingChinesecarmakerintheEUwith25%ofBEVsimportedfromChinaandfourmodelssellingmorethan5,000units(MG4,ZS,5andMarvelR).PolestaristhesecondlargestChineseOEMwithitsPolestar2modelaccountingfor7%ofChineseimports.ThethirdlargestChinesecarmakerintheEUisBYD(4%ofChineseimports),mainlythankstotheAtto3model,whichsoldjustover10,000units.OthermajorChinesecarmanufacturersincludeGreatWallMotorswiththeOrabrand,NioandXpeng.

WhenwelookacrosstheEuropeanmarkets,ChinesebrandsseemtobetargetingbothmatureandlessmatureBEVmarkets.InGermanytheirsharewas6.9%in2023,inSpain;10.6%.InFrancethesharewas9.6%in2023,butisexpectedtodropsignificantlythisyearduetotheintroductionofthenewEVsubsidyscheme,or“eco-score”thatwouldine?ecteliminatesubsidiestomostChinamadeEVs.WhileinSwedenandtheNetherlandstheirshareis13.3%and8.9%respectively.

LookingatallBEVsimportedfromChina,includingthosefromWesterncarmakers,almostathird(29%)ofBEVssoldinFranceandSpaincomefromChina,mainlyduetothelargeshareofDaciaandTeslacars.InItalyandtheUK,morethanafi什hofBEVscomefromChina(23%and22%respectively).Theirshareis17%inSwedenandtheNetherlands,and15%inGermany.Amongthelargestcarmarkets,France,SpainandItalyhavethehighestshareoverall,whiletheUKandSwedenhavethehighestshareofChinesebrands.

Figure4:ChineseBEVsalesinsomelargecarmarkets

Ifgrowthcontinuesasin2023/4,T&EestimatesthatelectriccarsmadeinChinabyallbrandswillaccountfor26%ofallBEVsalesin2027.Withinthat,theshareofChinesebrandsisexpectedto

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overtakethatofwesternones,whiletheshareofwesterncarmakers?importswillshrink,inpartduetoTeslareducingimports.

Onaverage,9,800electriccarswereshippedintoEuropebyChinesebrandsmonthlyin2023,afigurethatislikelysubduedbytherecentlyreported7shippingcontainershortage.In2024,thisisexpectedtoriseto19,000permonth.Inasignofwhat?scome,BYDhasrecentlystartedleasing8itsowncargoship,theExplorerNo.1,toshipelectriccarsintoEurope.TheChinesecarmakerisexpectedtohave7dedicatedvehiclecarrierships(or“ro-ro?s”)inthefuture9,asittargetsthecurrentlogisticsbottleneck.SAICisfollowingsuit10,likelynottobetheonlyone.Giventhis,itispossiblethattheabovefiguresareontheconservativesideandwithoutaction,amuchbiggerproportionofEU?sBEVsaleswillbecomingfromChinainthecomingyears.

3.ImpactofincreasedEVtari?s

3.1Costcomparison

WhileChineseelectriccarmodelssoldinEuropeareabovethepricessoldintheirhomemarket,theyarenonethelesscheaperthantheEuropeanalternatives.LookingattheaverageEVpricesbasedon2023sales,carsfromChineseOEMsareonaverage5-27%cheaperdependingonthesegment.

MG4,Polestar2,MGZS,BYDAtto3andMG5werethe5topsellingChinesemodelsinEuropein2023.WhenonecomparestheiraveragepricetotheBEVmodelsfromnon-chineseOEMs,theyare9-28%cheaperonaverage,asdetailedbelow.

-MG4atanaverage11priceof€38kcomparedtoanaveragepriceof€42kforC-segmentBEVmodelsfromnon-Chinesecarmakers,or9%cheaper;

-Polestar2atanaveragepriceof€53kcomparedtoanaveragepriceof€63kforD-segmentBEVmodelsfromnon-Chinesecarmakers,or16%cheaper;

-MGZSatanaveragepriceof€38kcomparedtoanaveragepriceof€53kforJC-segmentBEVSUVmodelsfromnon-Chinesecarmakers,or28%cheaper;

7FT,https://www.什.com/content/4e85e5d6-82a8-457d-87a5-b2a15e396475

8Electrek,

https://electrek.co/2024/01/11/byd-shipping-evs-first-ship-europe/#:

~:text=BYD-,BYD%20is%20now%20shipping%20its%20own%20EVs,cargo%20ship%20heads%20to%20Europe&text=A什er%20overtaking%20Tesla%20in%20global,to%20carry%20domestic%20EVs%20overseas.

9GlobalTimes,Feb2024,

/page/202402/1307230.shtml#:

~:text=Chinese%20carmaker%20BYD%20said%20it,of%20BYD%2C%20said%20on%20Sunday.

10Handelsblatt,

/unternehmen/industrie/autohersteller-chinesischer-autobauer-saic-baut-trans

portflotte-aus/100007868.html

11AveragebasedonstartingpriceintheNetherlandsofeachversionofthecar(eachversionbasedondi?erentbatterysize),fromEVDatabase.

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-BYDAtto3atanaveragepriceof€39kcomparedtoanaveragepriceof€53kforJC-segmentBEVSUVmodelsfromnon-Chinesecarmakers,or26%cheaper;and

-MG5atanaveragepriceof€37kcomparedtoanaveragepriceof€42kforC-segmentBEVmodelsfromnon-Chinesecarmakers,or10%cheaper

Figure5:PricecomparisonbetweenChineseandothercarmakers

ThosewithknowledgeofChinao什enpointtoasignificantlevelofgovernmentsubsidisationforChineseEVbrands.Statesupportallegedlycoverssomeofthebatteryandbatterycomponentcosts,aswellaslowerlandacquisitionandenergycosts.Ontop,companiesthroughoutthebatteryvaluechainhaveaccesstocheapcredito什enunderwrittenbythelocalandnationalChinesegovernment.This,coupledwiththeEVproductionovercapacityvsthedomesticdemand,enablesChinesecompaniestosignificantlylowerthefinalpriceoftheirelectricvehiclemodels(orbatteriessoldtothem).E.g.anMG4modelinChina(asMGMulan)costsamereUSD23,500,whileaBYDAtto3equivalent(YuanPlus)hasrecentlybeendiscountedtolessthanUSD17,000.Whetherornothighlevelsofdirectandindirectsubsidisationtakeplacearerightlypartoftheanti-subsidyinvestigationlaunchedbytheEuropeanCommission.

Thecurrenttari?sappliedtoimportsofChina-madeEVsintotheEUis10%,comparedtothe15%tari?sthatChinaleviesonimportsofEuropeanEVsintothecountry(and27.5%intheUS).IfoneassumesanincreaseintheEU(orUK)tari?by15percentagepoints(tari?of25%ofthepre-taxvalueofthecarinsteadof10%today),mediumC-segmentcarsandmediumSUVs(JD-segment)soldby

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Chinesecarmakersareexpectedtobecomemoreexpensivethannon-Chinesebrandsby8%and2%respectively.Othersegments,includinglargecars(segmentD),compactSUVs(segmentsJC)andlargeSUVs(segmentJE),wouldremaincheaperbyanaverageof11%.

Figure6:Pricecomparisonwithadditionaltari?s

3.2Revenuegenerated

Itisimportanttorememberthattherevenuegeneratedgoesbacktothepublicbudgets,with75%ofitgoingtothegeneralEUbudget(asOwnResources)andtheremaining25%tothememberstates.

Ifthetari?was15percentagepointshigherthanitistoday,anadditionalEUR1.4billionwouldhavebeengeneratedin2023basedonallBEVsimportedfromChina.ThisrepresentsanadditionalrevenueofoverEUR1billionfortheEuropeanCommissionalone.ThisismorethanthecurrentannualbudgetforthecleantechcallsundertheEuropeanInnovationFund,andcouldhavebeenusedtosupportmorelocalbatterymanufacturing.

Assumingaconstantaveragemarketpriceof€42,700forBEVsimportedfromChina,T&Eforecaststhatthe740,000BEVsimportedfromChinain2025wouldgeneratetotalrevenuesof€5.9billionfortheEUwitha25%tari?.IfhalfofthesecarswereproducedintheEU(i.e.thetari?wasprovinge?ective),therevenuewouldstillbe€3billion.ThiscouldbedirectlychannelledintotheEU

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InnovationFund(orasimilargreenindustryfundingmechanism)tosupportlocalcleantechscaleup.

3.3EU-UKrelationship

TheEUandUKareimportanttradepartners,with18%ofEU?scarexportsgoingtotheUKin2023.FollowingtheUK'sexitfromtheEU,thecurrenttradeinvehiclesisgovernedbytheTradeandCooperationAgreement(TCA).TCAincludesprovisionsontherulesoforigin,whichdefinetherequiredlocalcontentforelectricvehiclesandtheirbatteries,toavoidtari?sonEVtradebetweenthetworegions.Ifthesearenotmetbytheendof2026,atari?of10%willbeimposedfrom2027onwards.ThisisdesignedtostimulatelocalmanufacturingandscalingofthebatterysupplychainonbothsidesoftheChannel.

However,ratherthanthinkingofthetwoblocksseparately,alotofsynergiesandbenefitscanbeachievedbylookingatEurope(theEU+theUK+Norway,etc)asonesinglebatterysupplychainblock.T&Eanalysisofthepublicpipelineofprojectsshowsthatwhilethereisnocathodematerialmanufacturingcurrentlyplanned,aroundathirdofallEuropeanlithiumprocessingprojectsareexpectedtobeinthesitedintheUK.

Figure7:LithiumrefiningcapacityintheUK,GermanyandFrance

SimilarlytothegreenalliancecurrentlyinplacewithNorway,theEUandtheUKshouldformastrategybatterysupplychainsalliance.Asanexample,lithiumprocessedintheUKcanbesentacrosstheChanneltothehubofbatterycomponentmakersinNorthernFrance,withresultingbatteriesthenfitintoEVmanufacturingsitesacrossEuropeandelectriccarssold(andrecycled)

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acrossthealliancecountriestari?-free.Onrecycling,theUKisestimatedtoaccountforupto30%ofthecapacitytorecyclelithium-ionbatteryscrapandend-of-lifebatteriesby2030.ManyoftheUK'sEVmanufacturingfacilitiesalreadyplantousebatterycellsproducedelsewhereinEurope,eitherinGermanyorFrance,socreatingsuchatari?-freeallianceiseconomicallyandstrategicallynecessary.

Figure8:RecyclingcapacityintheUK

Moreimminently,withtheEUlikelytoincreaseitsEVimporttari?s,thereisariskthatmuchoftheChinesecapacitywillfinditswayintotheUKmarket,potentiallyundermininglocalEVmanufacturingplans.AccordingtoACEA12,theshareofChinesemadecarsinUKBEVsalesstoodatasignificant31,8%in2022andislikelytokeepgrowing.TheUKgovernmentshouldthereforecommissionaninvestigationbytheUK?sTradeRemedyAuthorityintoitsEVimporttari?spolicyandincreasetheimporttari?sinlinewiththeEUandUSmarkets.

4.Whataboutbatteries?

China?splaybookhaso什enbeentosubsidiseitsownindustry,limitforeignaccesstothedomesticmarket,createovercapacityandthenfloodtheothermarketswiththoseproducts.ThisenablesChinesecompaniestolowerpricessignificantly,anditisthereforeunlikelythatraisingtheEVtari?onitsownwilltipthebalanceinfavourofthe“MadeinEurope”EVsupplychain.

Ontopofsubsidies,whatmakesEVproductioninChinasoe?icientandcost-e?ectiveisthecommerciallarge-scaledominanceintheentirevaluechain,frombatteriestoprocessingmetalsthatgointothem.

12ACEA,2023,

https://www.acea.auto/fact/fact-sheet-eu-uk-vehicle-trade/

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Figure9:Gigafactorycapacitybyregion

Attheheartofthatvaluechainarelithium-ionbatterycells.Over80%ofgloballithium-ionbatterymanufacturingistodayinChina13,expectedtodropto68%by2030thankstotheonshoringe?ortsinbothEuropeandtheUS.Batterycellsrepresentupto40%ofanaverageelectriccarvalue,withoverhalfofthatlockedincathodeactivematerials(includingcobalt,nickel,manganeseandlithium).

Europehasbeencatchingup.Acombinationoflong-termEVmarketcertaintythankstocarregulations,thee?ortsbytheEuropeanBatteryAllianceandtheinfluxofstateaidinGermanyandFrance(inresponsetothesubsidiesintheUSInflationReductionAct)haveresultedinahealthypipelineofbatteryinvestmentsacrossEurope.MorethanEUR180blnhasbeeninvestedintotheEUbatteryvaluechain,predominantlygigafactories,todate.BillionsofstateaidhavebeencommittedtoprojectssuchasNorthvoltinGermanyandVerkorinFrance.T&Eestimatesthat1.8TWhofcapacitycancomeonlinethisdecade(withtheproductionoutputof1.2TWh),morethanenoughforEurope?sneedsfromallmannerofelectricvehicles,energystorageandothersmallerapplications.

13BenchmarkMIneralsIntelligence,

/article/where-are-the-worlds-gigafactories

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Figure10:BatteryproductionanddemandinEurope

T&Eanalysisofthebatteryplantpipelinevstheexpectedlithium-ionbattery(LIB)demandshowsthat:

-66%ofEurope?sneedscanbemetin2024,risingto75%in2025,

-Self-su?iciencyispossibleasearlyas2026ifallprojectscomeonlineontimeandcapacityplanned.

ThisindicatesthatEuropehaspotentialtoproducemostofitslithium-ionbatterydemandlocally.

Butexecutingallthoseplansonscheduleandsuccessfullywillnotbeeasy.Manyareatrisk,withBritishvoltintheUKandallegedlyItalvoltinItalyjustafewlatestexamplesthatfailed.Chinaisyearsaheadintermsoftechnologycommercialisation,massmanufacturingandsupplychainpreparedness.TheUShasbothastronganti-ChinapolicythatpreventseasyaccesstothemarketandgenerousproductioncreditsundertheUSIRA.Europehasneither,withthesupportannouncedvianationalsubsidiesandtherecentlyannouncedBatteryFundnowhereneartheEUR68blnthattheCommissionestimates14willbeneededfortheprojectpipelinetomaterialise.

Therefore,ifitisEurope'sgoaltohavesignificantbatterymanufacturinginEuropeitwillneedtointroducemeasurestocreateapulltomanufacturelocally.Suchmeasurescaninclude:

14EuropeanCommissionNZIAassessment,

https://single-market-economy.ec.europa.eu/document/download/680f052a-fa6c-4f63-a1ec-c4866fa25a27_en?filename=SWD_2023_68_F1_STAFF_WORKING_PAPER_EN_V4_P1_2629849.PDF

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-Strongbatterysustainabilityrequirementsshouldrewardlocalcleanandcircularmanufacturing.Notably,thenewcarbonfootprintrulesbeingdevelopedundertheBatteryRegulationshouldrewardcompaniesthatusedirectconnectiontonewandlocalrenewableenergygeneration.Renewableenergycertificates(RECs)shouldonlybecountediftheproducercanreliablydemonstrateastricttemporal(hourly)andgeographic(samebiddingzone)linktowheretheenergyisgenerated.Ontop,anambitiousCO2thresholdisneededtocreateapullforbatteriesproducedlocallyandwithcleanerelectricity.

-Strong“MadeinEU”,orlocalcontentrequirements.ButonlyFrancehassofaraddedsuchrequirementstotheirEVsubsidiesvia“eco-score”,whilethe40%localmanufacturingbenchmarkintheNetZeroIndustryActlacksteethandisnotbinding.

Thisleavestradedefencepolicyasanothertooltouseintheshortterm.

4.1Tradepolicy&EU?sbatterycellambition

IfEurope?sgoalistohavelocalbatterymanufacturing,itmightneedtorelyontradedefencetoolstocreatethebusinesscasetoinvesthere.CurrentlyEU?simporttari?sonlithium-ionbatteriesarethelowestcomparedtotheUSandChina:atjust1.3%currently(2.7%withouttheAutonomousTari?Suspension)vs10%inChin