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Europe’s ambition to build a world-leading battery industry is facing many headwinds. As local plans falter, over 90% electric car and storage batteries are produced by South Korean and Chinese companies in the EU. An additional 40% of announced battery gigafactories are from these companies, who are global leaders in the technology and more likely to succeed. Many European carmakers are entering partnerships with Chinese battery players to secure the supply.
But there are concerns about the environmental and social conditions under which some of these facilities, e.g. CATL battery plant in Hungary, are operating. Critically, as homegrown battery companies struggle, will the upcoming partnerships with foreign battery leaders enable the EU to gain the expertise we lack? Is it the road to becoming a battery powerhouse or an assembly plant?
T&E has commissioned a study to Carbone 4 and independent experts to find out. The study analysed the environmental and social conditions in the CATL battery plant in Hungary and the LG one in Poland, as well as the technology transfer provisions in the VW-Gotion and CATL-Stellantis battery partnerships.
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The Chinese CATL factory in Hungary and the South Korean LG Energy Solutions plant in Poland received at least EUR 900 mln in state aid subsidies from the Hungarian and Polish governments, often drawn from the European post-covid recovery fund. However, no environmental or social conditions were attached by the European Commission, or auditing performed.
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Both facilities have breached the EU's Industrial Emissions Directive on air pollution, as they exceeded the levels for NMP, a toxic substance used in cathode manufacturing. In Hungary, further concerns around insufficient water management plants and energy supply are also revealed.
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These environmental breaches in these two plants add up to the poor working conditions largely reported in the Hungarian battery industry.
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The analysis, largely relying on external experts due to the lack of public data, also looked at decision making, technology/skills transfer and other key conditions in two recent partnerships: the VW-Gotion in Gottion (Germany) and the CATL-Stellantis in Zaragoza (Spain). It found no EU-wide (or national) requirements on technology transfer, local content or other conditions in these joint ventures.
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While VW invested EUR 1.1 billion into Gotion and holds 26.47% of shares, it is said to have less significant say in battery operations. Experts point out that the partnership is more about securing LFP battery supplies to VW’s European operations, than comprehensive knowledge or IP transfer to Europe.
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The Spanish government invested a total of EUR 300mln in the CATL-Stellantis gigafactory. No conditions on technology or skills transfer were attached to this subsidy, so it was left to Stellantis and CATL to negotiate. The overall project is said to be worth around EUR 4bln.
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As it stands, Europe lacks technology or manufacturing expertise for a top cleantech technology, batteries. While this won’t delay EV targets as plentiful global battery cell supply exists, this entails serious geopolitical, economic and security risks. Coupled with restrictions on technology transfer in China, and despite the many Chinese and South Korean plans to build battery factories to date, Europe risks becoming an assembly plant.
Policy recommendations:
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Make use of all instruments to assert more local control and local content. These include conditions to state aid, EU public funds and procurement, trade tools such as tariffs, and sustainability requirements, e.g. EV “ecobonus” or grid-based CO2 battery rules. All these can be used to require onshoring of battery manufacturing on terms set by the EU
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Define an EU-wide comprehensive framework on foreign FDI, including majority local ownership and decision-making rules (prioritising licensing deals e.g.), local workforce and supply chain provisions, and requirements on IP and manufacturing expertise.
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Staying united as EU27 against foreign pressure to protect technology. A common definition of what constitutes “EU Made”, “foreign” and “foreign of concern” can help streamline implementation across EU countries.
