<p>Europe’s quest to localize its electric vehicle industry is increasingly at odds with the economics of a China-dominated battery supply chain, as evidenced by a string of recent high-profile battery project cancellations. The continent’s EV adoption is soaring, but much of that is driven by battery materials and equipment procured from China.</p><div class="apInarticleSmallRes"><div id="ads_6122441_EV_ev_us_Rectangle_rectangle_first_1772370126" class="ap" style="width: 300px"></div></div><p>And, asAutomotive News highlighted in a recent report,European companies are now finding it simply too hard to decouple from that.</p><p>Last year, Porsche began scaling back production at its Cellforce battery division to focus on R&amp;D. The reason? Manufacturing was no longer “economically viable,” the carmaker said.</p><p>Sweden’s Northvolt, which was aiming to put Europe on the map as a battery production leader, filed for bankruptcy in 2024 due to mounting losses and production-related challenges. And Stellantis-backed Automotive Cells Company shelved two battery factory projects in Germany and Italy last month. The “prerequisites” to start those plants hadn’t been met, the company said.</p><div class="outstream_partner"></div><section>        <span class="svg-search">                                                </span>                            <img src="https://imageproxy.pbkrs.com/https://cdn.motor1.com/images/static/16x9-tr.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Volkswagen Group PowerCo Battery Plant Salzgitter Germany" width="16" height="9" original-src="https://imageproxy.pbkrs.com/https://cdn.motor1.com/images/static/16x9-tr.png"/>        <div class="photo-title"><p>Volkswagen Group's PowerCo battery division's assembly plant in Salzgitter, Germany.</p></div>    <div class="source-title">Photo by: Volkswagen</div></section><p>As the outletreported Wednesday, a key factor impairing Europe’s ability to become independent in battery production is China’s manufacturing might, vastly more mature supply chain, and prolonged state-backed incentives.</p><p>A joint statement from the CEOs of the Volkswagen Group and Stellantis issued early this month perfectly sums up what’s happening on the continent.</p><div class="apInarticleSmallRes"><div id="ads_6122441_EV_ev_us_Rectangle_rectangle_1_1772370126" class="ap" style="width: 300px"></div></div><p>“We are investing heavily to build an integrated European sector, essential for our technological sovereignty, but consumers legitimately expect affordable electric vehicles,” Stellantis CEO Antonio Filosa and VW CEO Oliver Blume said. “However, the more prices need to be kept down, the greater the need to import the cheapest batteries.”</p><p>In other words, Chinese batteries are needed to make EVs affordable. The country lords over most of the global battery supply chain, from mineral refining to production. And it's especially dominant in the world's cheapest battery chemistry: lithium iron phosphate. China's scale and overcapacity mean it can make batteries more cheaply than anybody else.</p><div class="item m1-ap-native m1-ap-native-mobile"><div id="ads_6122441_EV_ev_us_Native_native_3_1772370126" class="ap"></div></div><div class="item m1-ap-native "><div id="ads_6122441_EV_ev_us_Native_native_2_1772370126" class="ap"></div></div><p>In the U.S., battery plants are being delayed and scaled back for a slightly different reason. The loss of the $7,500 tax credit and other pro-EV regulations is stunting demand for battery cells for the time being. Stateside, companies including GM, Ford and Stellantis have walked away from battery projects or redirected those resources toward stationary storage applications—rather than EVs. In America, Chinese EV batteries are less in-demand due to high tariffs on them.</p><p>Still, America's battery industry is maturing. And Europe’s own battery manufacturing ecosystem is anything but stalling. The Volkswagen Group’s battery division PowerCo has significantly ramped up production at its Salzgitter, Germany, plant, which has an annual capacity of 20 gigawatt-hours, enough to supply batteries for 250,000 EVs. But the majority of the manufacturing tools are imported from Asia, mainly China, according to <em>Automotive News</em>.</p><div class="apInarticleSmallRes"><div id="ads_6122441_EV_ev_us_Rectangle_rectangle_2_1772370126" class="ap" style="width: 300px"></div></div><section>        <span class="svg-search">                                                </span>                            <img src="https://imageproxy.pbkrs.com/https://cdn.motor1.com/images/static/16x9-tr.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Volkswagen Prismatic Battery Cell Production" width="16" height="9" original-src="https://imageproxy.pbkrs.com/https://cdn.motor1.com/images/static/16x9-tr.png"/>        <div class="photo-title"><p>Volkswagen's prismatic battery cell production in Germany.</p></div>    <div class="source-title">Photo by: Volkswagen</div></section><p>Policymakers are now trying to push back against that dependence. Last year, the EU allocated €1.8 billion in interest-free loans for European battery companies to manufacture cells locally—the program is called Battery Booster. And the continent is also pursuing local sourcing requirements for critical minerals used in batteries, similar to the Inflation Reduction Act (IRA) in the U.S.</p><p>The U.S. serves as a good example here of what could happen. In the months following the IRA’s passage, battery project announcements surged. But many of them were canceled later under the Trump administration, leaving automakers and battery suppliers with billions in losses.</p><p>Europe’s EV market seems less politically polarized, and sales continue to boom, which could give its policy framework a better shot at success. And if that happens, it could serve as a blueprint for other parts of the world also looking to break up from China.</p><div class="apInarticleSmallRes"><div id="ads_6122441_EV_ev_us_Rectangle_rectangle_3_1772370126" class="ap" style="width: 300px"></div></div><p><em>Contact the author: suvrat.kothari@insideevs.com</em></p><section> <p>Related Stories</p> <div class="wrapper-related-item"> <div class="related-item">                    Donut Lab's Solid-State Battery Charges Fast. But Experts Still Have Questions </div> <div class="related-item">                    Jeep's Parent Company May Use Chinese EV Tech In Its Cars </div> <div class="related-item">                    Volvo Is Recalling 40,000 EX30s Because They Might Catch On Fire </div> <div class="related-item">                                     Ford's $30,000 EV Pickup Uses LFP Batteries For An Unexpected Reason </div> </div> </section>                                                                                                                                                                                                                                                                                <section><p><span>We want your opinion!</span></p><div class="compact-body-large"><p>What would you like to see on Insideevs.com?</p>Take our 3 minute survey.</div><p>- The InsideEVs team</p></section>                                                                                                    <div class="group isBottomShare mb-spacing-md-lg">                                <div class="normal-title-medium mb-spacing-sm-md text-center text-text-contrast-soft capitalize">                                    Share this Story                                </div>                                <div class="parent-shareBox parent-shareBox-bottom">                                    <ul>                            <li>                                                                                                                                            Facebook                                                                        </li>                                    <li>                                                                                                                                            X                                                                        </li>                            <li>                                                                                                                                            LinkedIn                                                                        </li>                            <li>                                                                                                                                            Flipboard                                                                        </li>                                                    <li>                                                                                                                                            Reddit                                                                        </li>                            <li>                                                                                                                                            WhatsApp                                                                        </li>                            <li>                                                                                                                                            E-Mail                                                                        </li>                                                                                    <li>                                                                                                                                                 copy                                                                        </li>    </ul>                                </div>                                                                                                            <div class="flex justify-center items-center">                                            <div class="m1-article-meta_comments m1-article-meta_comments-bottom uppercase md:hover:underline items-center max-w-[320px] w-full comfort-label-large mt-spacing-md-lg justify-center xsmob:gap-spacing-sm-sm text-center inline-flex py-spacing-md-xs px-spacing-md-sm gap-spacing-sm-md rounded-radius-4 text-button-accent-solid-calm-text bg-button-accent-solid-calm-fill/15 cursor-pointer active:scale-95 transition-transform duration-300 ease-linear">                                                                                                                                                                                                    <span class="top-counter-comments-label">GO TO COMMENTS</span>                                                                                                     <div class="article-top-counter">                                                        <span>(</span>                                                        <div class="coral-count coral-coment-button-number"></div>                                                        <span>)</span>                                                    </div>                                                                                            </div>                                        </div>                                                                                                </div>                                                            <div class="tip-us-email-container text-center">                                    <div class="tip-us-email">                                        <span>Got a tip for us? Email:</span>                                                                                    tips@insideevs.com                                                                            </div>                                </div>                                                                                                                                                                            <div class="content-area-box-outbrain">                                                                            <div class="outbrain_service">                                            <div class="OUTBRAIN">                                            </div>                                        </div>                                                                    </div>                                                                                                                        <div id="disqus-block-wrapper">                                    <div id="comments-stub"></div>                                    <div id="comments" class="comments-container no-apb">                                                                                    <div class="m1-top-comments__wrapper" id="m1-top-comments__wrapper">                                                <div class="m1-top-comments" id="m1-top-comments">                                                    <div class="m1-top-comments__body">                                                        <div class="m1-top-comments__empty"></div>                                                    </div>                                                </div>                                            </div>                                                                                                                                                                    <a id="show-disqus" class="commentsNumber show-disqus show-coral comfort-label-large active:scale-95 transition-transform duration-300 ease-linear md:hover:underline" rel="nofollow" target="_blank">                                                <span class="coral-coment-button-icon">                                                                                                                                                                                                                                                                                                                                </span>                                                <span class="coral-coment-button-text">View all comments</span>                                                <span class="coral-coment-count-wrap">                                                    <span>(</span>                                                    <span class="coral-count coral-coment-button-number"></span>                                                    <span>)</span>                                                </span>                                            </a>                                                                                                                                                                                                                                                                        <div id="coral_thread">                                                <div class="coral_placeholder__wrapper">  <div class="m1-placeholder__tabs">    <div class="m1-skeleton m1-skeleton__tab"></div>  </div>  <div class="m1-placeholder__line m1-skeleton"></div>  <div class="m1-placeholder__textarea m1-skeleton m1-skeleton--rounded"></div>  <div class="m1-placeholder__button m1-skeleton m1-skeleton--rounded"></div>  <div class="m1-placeholder__middle">    <div class="m1-placeholder__count">      <div class="m1-placeholder__count-text m1-skeleton"></div>      <div class="m1-placeholder__count-number m1-skeleton m1-skeleton--rounded"></div>    </div>    <div class="m1-placeholder__line m1-skeleton m1-mobile"></div>    <div class="m1-placeholder__sort">      <div class="m1-placeholder__sort-text m1-skeleton"></div>      <div class="m1-placeholder__sort-field m1-skeleton m1-skeleton--rounded"></div>    </div>  </div>  <div class="m1-placeholder__line m1-skeleton m1-non-mobile"></div>      <div class="m1-placeholder__comments">              <div class="m1-placeholder__comment m1-skeleton m1-skeleton--rounded"></div>          </div>  </div>                                                </div>                                                                                                                            </div>                                                                    </div>                                                            <div id="taboola-below-article-thumbnails"></div>                                                                        

TSLA

POAHY

IDRV

CARZ

DRIV

ROBO

MOTO

<p>Europe is struggling to localize its electric vehicle battery supply chain, facing challenges due to China's dominance in battery production. Recent cancellations of major battery projects, including those by Porsche and Northvolt, highlight the difficulties in decoupling from Chinese suppliers. Despite investments in local production, European companies find it hard to compete with China's lower costs and mature supply chain. Policymakers are attempting to reduce dependence on imports through initiatives like the Battery Booster program, but success remains uncertain as the continent's EV market continues to grow.</p>

- Europe's ambition to localize its electric vehicle (EV) industry faces challenges due to reliance on China's battery supply chain, highlighted by recent project cancellations.  
- Several companies, including Porsche and Northvolt, have scaled back operations or declared bankruptcy due to economic pressures and competitive disadvantages.  
- To reduce dependence on imports, the EU has allocated €1.8 billion to support local battery production and is pursuing regulations for critical mineral sourcing, aiming for a sustainable future in EV manufacturing.

Europe Is Learning An Uncomfortable Truth About Local Battery Production