Europe’s Battery Gamble: Can Industrial Policy Secure EV Sovereignty?

Europe has made tangible but fragile progress toward a homegrown battery industry: recent gigafactories and upstream investments mark a shift from announcements to first production, yet many facilities deliver only a fraction of their nameplate output. That shortfall reveals a gap between political ambition and commercial throughput — early-stage plants, component bottlenecks and immature supplier networks limit scale-up. Finished-cell imports remain material, and low-cost Asian chemistries (notably LFP) are already reshaping competitive dynamics by compressing unit costs and displacing higher-cost NMC/NCA pathways. Midstream capabilities — cathode precursors, active materials processing and refining — carry outsized value and are central to supply security; Europe lags in many of these steps. The policy choices now being written into the Industry Accelerator Act are pivotal: thresholds for ‘local content’, which partners count as domestic, and the scope of eligible support will steer investment decisions and partnerships. Carmakers are split — some prioritise near-term cost and chemistry flexibility, others want clearer localisation to secure midstream supply. The competitive picture is further complicated by China’s deliberate industrial sequencing and outward investment: Chinese OEMs and suppliers have amassed upstream scale and are establishing plants in Hungary, Spain, Brazil, and parts of Africa, shortening logistical routes and lowering freight and inventory costs for export-oriented models. That geographic redistribution means Europe competes not only with Asian producers but with an expanding Atlantic production ecosystem that leverages proximate ports, lower costs and integrated supplier networks. Trade remedies alone will not recreate supplier ecosystems or the skilled labour pipelines needed to operate them; reversing competitive drift requires coordinated public investment in grid and port infrastructure, training and apprenticeships, recycling and second‑life capacity, and calibrated trade and investment diplomacy. If the EU adopts weak localisation rules or counts a broad set of partner countries as equivalent to domestic content, subsidised external supply chains could capture large shares of European demand. Conversely, tighter local-content definitions, targeted financing to bridge early operational shortfalls, and policies to shore up midstream capabilities could narrow the gap — but will entail short-term disruption and reallocation of investment. The window to act is limited: scale and supplier maturity must grow quickly if Europe is to retain substantive value capture in batteries and EVs by 2030.