The European automotive industry and Europe should seek new agreements with Japanese and Korean battery manufacturers in order to reduce its dependence on China, suggests a study carried out by Dunne Insights on behalf of the European Initiative for Energy Security (EIES) foundation (“Europe’s Auto & Battery Industry: Revolutionary Change – Or Extinction“).
Priority to Japanese, Koreans and bold investments
“European companies should prioritize agreements with Korean and Japanese battery manufacturers, seek to acquire know-how to increase production and invest in favor of strategies that are in line with European interests,” the study in question states, while emphasizing that Europe should initially invest 20 billion euros in battery giga-factories that could be joint ventures with Koreans and Japanese on European soil. In the long term and until 2035, according to the study, 100 billion euros should be invested in order for Europe to gain its “strategic autonomy” from China.
“Europe cannot afford to be beholden to and dependent on Chinese imports,” said Dunne Insights CEO Michael Dunne, noting that “it is time to take decisive action towards a leading industry that creates jobs and innovates.”
The study found that Europe is currently a decade behind China in battery technology and supply chain development, with China controlling 79% of global battery production and 60 to 95% (depending on the raw material) of the processing of critical minerals used to make batteries. China already has the capacity to meet half of global demand for electric vehicles and all of the demand for lithium-ion batteries.
Synergies with China but under conditions
“China’s dominance in the global supply chain related to batteries – from the extraction of raw materials to the production of modules – is undisputed. Its dynamics in the production of batteries and electric vehicles puts Europe in a vulnerable position of dependence,” the study emphasizes, noting that “although future agreements with Chinese companies cannot be avoided, they should be governed by a strict framework.”
As it is clarified in relation to the “strict framework,” penetration of the European market could be used as a point of pressure in order to seek to secure know-how and investments from the Chinese. Chinese suppliers should be able to market and manufacture their products in the EU only if they collaborate with European companies, which in this way would gain know-how and Europe would also gain new jobs. Synergies could enable Europe to claim “equality” with Europe. As the study clarifies, in the case of synergies there should be strict rules, such as European companies owning 51% of any joint ventures in order to remain in European hands.
China’s absolute dominance in EVs
In numbers, based on the research, China produces more electric vehicles than any other single country but, above all, more than all others even if their sizes are added together. Indicatively, China during 2024 produced 12 million electric vehicles compared to 2.4 million in Europe and 1 million. in the US.
The study also argues that China can develop and produce an electric vehicle in half the time compared to its European competitors, while the speed, state subsidies for the production of electric vehicles and the already existing local supply chain mean that it produces these vehicles at a cost 25-30% lower than any other car-producing country.
The Tesla factor
The Dunne Insights study also refers to Tesla, with which, it argues, Europeans should seek closer cooperation as this could bring Europeans opportunities to develop its goals in relation to battery production, the related supply chain, battery recycling and finding raw materials.
“The faster Tesla’s industrial activities in Berlin become profitable and successful, the faster Tesla will start “transferring” production from China to Europe. This will also mean more demand for batteries in Europe,” the study states, which points to this particular unit and Tesla as a possible driver of developments in battery production in Europe.
Of course, against the backdrop of Elon Musk’s active involvement in politics, Tesla does not seem to be having the best days in Europe in terms of public acceptance.
