Protecting European Auto (& Battery) Jobs — Finally EU Priority – CleanTechnica

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Lawmakers are right to ensure electric cars are made in the EU — and not only by European companies

2023 saw a turbulent start for the electric vehicle industry across Europe. The continent’s flagship 2035 cars law, which sets the entire automotive transformation into gear, was being held hostage by the German Liberals and their oil friends’ demands for credits for synthetic fuels.

Elsewhere the US Inflation Reduction Act (IRA) and its generous subsidies were causing an exodus from Europe’s nascent battery industry, with local champions such as Northvolt prioritising the US market. To add fuel to the fire, the sales of Chinese-made electric cars were on a steady ascent, which risked putting European carmakers out of business.

Our work as T&E was clear. In early spring we exposed that two-thirds of Europe’s battery gigafactory plans were at risk of being delayed, scaled down or cancelled altogether. But we also showed that the potential to onshore critical parts of the value chain including cells, cathodes and lithium itself exists, and we published a blueprint of the measures needed.

Europe wakes up, but problems persist 

Luckily, politicians EU-wide started to wake up to the challenge and act. The 2035 engine phase-out ban was finally signed off in spring. And the initial loosening of the national subsidy rules (benefiting richer Germany and France) was followed by a set of EU-wide laws to give local green projects a boost. This included the Net Zero Industry Act designed to accelerate battery factories and other cleantech industries across Europe, and the Critical Raw Materials Act set to secure responsible supply of critical metals, including recycling.

While these acts set a helpful framework to spearhead local projects, two problems remained unsolved. First, the imports of Chinese-made electric cars were posing an immediate risk while scaling domestic electric car and battery manufacturing would take time. Second, no fresh investment on the scale of the US IRA was in sight.

There is no question that Chinese industry is ahead of Europe’s in terms of costs, battery technology and supply chain preparedness. European automotive giants were too slow to transition and too arrogant to acknowledge they were lagging behind. Now they are playing catch-up. On top, their over-reliance on premium large SUV models is stalling the electric car mass market, opening the door to cheaper compact Chinese models.

But it does not have to be this way. Our study showed that a compact affordable made in Europe electric model is already feasible. This was followed by announcements of the Citroën e-C3 and Renault’s Legend, which will bring cheap models to Europe. Shifting to smaller electric cars is also a sound economic policy as it can save close to a quarter of the nickel, lithium and cobalt otherwise needed for larger batteries.

True turnaround 

Europe’s approach to industrial strategy truly started to shift after the summer. In her annual State of the Union address, the European Commission president startled many by announcing a probe into Chinese EV subsidies. The result is not yet known, but carmakers have already started to shift EV manufacturing to Europe. This should not become outright European protectionism; instead this should only ensure that electric cars are made in Europe (and not by Europeans alone). Gradually raising European tariffs on battery cells — some of the lowest globally today — would also help the nascent industry to scale.

But the biggest surprise came at the very end of 2023. For months companies and campaigners were calling on the EU to announce a dedicated support mechanism for the battery supply chain, similar to the one already in place for hydrogen. For a while this felt like knocking on a closed door. But in early December such a fund — part of Europe’s Innovation Fund backed by carbon allowances — was announced as part of the UK-EU tariffs deal. While the initial sum is less than the US IRA, it can be matched by national money and become a substantial tool to boost battery minerals and components manufacturing.

As the focus shifts to family time, turkey and mulled wine, the industrial story of automotive might be finishing on a high. But the job is far from done: 2023 set many frameworks that have to be turned into progress on the ground in 2024. The ins and outs of the new battery fund still need to be agreed. And Europe’s conservatives have already started an assault on the core pillar of Europe’s automotive transformation agenda.

2024 will show whether European politicians will manage to put short-sighted election plays aside for Europe to have a chance to meet its climate goals and carve out its place in the global cleantech race.

Article from T&E. By Julia Poliscanova, Senior Director, Vehicles & Emobility Supply Chains