Scaling up EU production could reduce the battery cost gap with China
Increasing battery production in Europe could reduce the gap between the cost of batteries produced in the EU and those imported from China to nearly 30%, compared with the current 90%. This is the conclusion of a report by Transport & Environment (T&E), which urges the EU to support the sector through “Made in Europe” policies.
The European Commission is preparing to present the Industrial Accelerator Act, part of the broader Clean Industrial Deal, aimed at protecting EU companies from competition with China and the United States in strategic sectors such as batteries, solar and wind energy, hydrogen production and electric vehicles. The regulation would introduce European production requirements that prioritise locally manufactured products when public funding is used. Some carmakers warn that such requirements could unintentionally raise battery costs and undermine the competitiveness of their models.
While the EU debates whether to introduce “Made-in-EU” criteria for public funding under the Industrial Accelerator Act, T&E’s analysis indicates that increasing production scale would significantly reduce the current cost advantage of Chinese battery manufacturers. According to the group, the European industry can grow and improve only if “Made-in-EU” criteria are introduced, eventually narrowing the current cost gap.
Access to batteries, their components and critical minerals remains essential for the EU’s economic security and resilience. Battery materials face vulnerabilities similar to those experienced with rare earths. Given the risk of trade disruptions already seen in the rare earth sector, Europe should act early to protect its supply chains.
Key findings from the Transport & Environment report
The report highlights several key points:
- A substantial share of the EV value chain is already local, with 45%–70% of the value of key components produced in Europe.
- Batteries represent the largest share of manufacturing costs, accounting for 83%–86% depending on the automaker. If production were relocated to Europe, batteries would account for over 90% of the additional cost increase.
- Cells produced in Europe are on average 17% more expensive than those made in the United States and 90% more expensive than Chinese cells, mainly due to limited economies of scale rather than structural disadvantages.
- Greater manufacturing efficiency could reduce the cost gap to $14 per kWh by 2030, compared with a potential value of $41 per kWh.
Overall, this would translate into an average additional cost of €500 per electric vehicle by 2030, with a range between €300 and €750 depending on the manufacturer. The impact on the final price could be lower if public incentives are used. According to T&E, this cost should be viewed as a form of “sovereignty premium” or insurance policy to protect Europe from geopolitical volatility and potential supply chain disruptions.