Europe’s ambitions of building an independent battery supply chain are facing significant challenges, with recent developments in the sector sparking concerns about its future. Several companies, including major automakers, have announced plans to cut jobs, close factories and halt projects. Swedish battery producer Northvolt filed for Chapter 11 bankruptcy protection in the U.S., while Portuguese energy company Galp reversed its decision to move forward with the Aurora lithium project in Portugal.
Despite these setbacks, some industry experts see these developments as an opportunity for Europe to reassess its approach to battery and electric vehicle (EV) production. According to Paul Lusty, head of battery raw materials analytics at Fastmarkets, this period of slowing EV demand and low lithium prices can be used to refine Europe’s strategy, focusing on scaling the entire value chain and fostering partnerships with leading nations.
Europe has long relied on global suppliers, particularly in Asia, for key battery components. However, to reduce this dependence, the EU has introduced several initiatives, including the European Green Deal and the Battery Regulation, which aims to promote sustainability and ethical sourcing. Additionally, the EU has classified batteries as a Strategic Value Chain under its Important Projects of Common European Interest (IPCEI) program, allowing member states to funnel public funds into battery-related projects.
Despite these efforts, the European battery supply chain remains fragile, hindered by challenges such as securing raw materials, scaling up production, and competing with established global players. Recent announcements, including the bankruptcy of Northvolt and job cuts at companies like Volkswagen and Ford, highlight the difficulties the industry faces.
Lithium prices, a key battery material, have dropped significantly in 2024, impacting profit margins for producers and slowing the development of new projects in Europe. This has led to a bearish outlook in the market, with some experts questioning the viability of Europe’s push to establish a self-sufficient battery sector.
However, some industry participants remain optimistic, suggesting that Europe can still achieve its goal of an independent battery supply chain with refined strategies and more targeted government support. They emphasize the need for political will to facilitate growth and reduce dependence on foreign suppliers, particularly from China.
In the face of these challenges, collaboration between Europe and other countries with established battery production capabilities could be a potential solution. Experts suggest that knowledge transfer, partnerships with Asian players, and coordinated subsidies and incentives could help Europe build a more resilient and competitive battery supply chain.
Overall, while Europe’s journey toward battery independence faces obstacles, strategic adjustments and increased collaboration could pave the way for long-term success.
