Competitiveness of the European Battery and Electric Vehicle Industry: Opportunities and Vulnerabilities in the Clean Industrialization Process

The European Battery and Electric Vehicle Industry in the Clean Industrialization Process: Growth, Imbalances, and Strategic Choices

The EU’s green transition is entering a critical phase. The “Clean Industrial Deal” launched in 2024 closely links decarbonization with economic competitiveness, and its success largely depends on progress in the core clean technology sectors of batteries and electric vehicles. As one of the first regions in the world to set zero-emission vehicle targets, the EU is transitioning from policy-driven to market-driven development, while a deep restructuring of the supply chain is reshaping Europe’s position in the global automotive industry.

Accelerating EV Adoption, but with Fragile Foundations

Data from Bruegel’s European Clean Tech Tracker shows that electric vehicle registrations in Europe hit a record high in 2025, with a monthly market share stabilizing at around 25%. Nordic countries such as Norway, Iceland, and Denmark are leading, with EVs accounting for over 55% of new car registrations. The EU’s four major automotive markets—France, Italy, Germany, and Spain—have seen significantly accelerated growth since the end of 2024, with demand rebounding in Germany after consumer subsidies were canceled at the end of 2023.

However, high barriers still constrain adoption: the average price of an electric vehicle in Europe exceeds €50,000, with only a few models priced below €30,000. Uneven distribution of charging infrastructure and policy swings in some member states have weakened the purchasing willingness of low- and middle-income households. Although the EU’s imposition of tariffs on Chinese-made battery electric vehicles aims to protect local manufacturers, it has reduced the supply of low-cost models in the short term, potentially slowing consumer transition instead.

Manufacturing Capacity Expansion and Structural Imbalances

On the manufacturing side, Europe’s EV assembly capacity has surpassed domestic demand. As of 2025, European factories have an annual assembly capacity of approximately 4 million vehicles, while annual sales within the EU are around 3 million. This surplus reflects companies’ strategic positioning for exports and future growth. However, battery cell production capacity still lags behind demand and is highly dependent on foreign-invested factories (such as LG, CATL, and Samsung SDI) and imported upstream materials. Europe’s current annual battery capacity is about 150 GWh, only half of the planned capacity, with most factories concentrated in a few countries such as Germany, Hungary, and Poland.

Trade data clearly reveals this structural contradiction: the EU is a net exporter of electric vehicles but a net importer of batteries. In 2024, the EU exported approximately €80 billion worth of EVs and imported around €60 billion worth of batteries. This pattern of “simultaneous surplus and deficit” indicates that Europe is highly competitive in downstream vehicle assembly but remains deeply dependent on external supply chains for upstream battery manufacturing and critical materials such as lithium, cobalt, and nickel.

The Anchoring Role and Shortcomings of the Policy FrameworkThe EU's 2035 zero-emission vehicle target (i.e., the ban on new fossil fuel vehicle sales after 2035) is seen as the cornerstone of market confidence. Bruegel analysis suggests that this long-term goal provides predictability for investment, directly driving the rapid expansion of Europe's electric vehicle and battery production capacity. However, policy stability remains at risk: some member states have called for postponing the target, and the EU itself lacks coordination among instruments such as tariffs, subsidies, and the Carbon Border Adjustment Mechanism (CBAM).

Currently, demand-side policies are clearly lagging behind supply-side efforts. Europe lacks large-scale consumer incentives similar to the U.S. Inflation Reduction Act, and the deployment of charging stations has not reached the 3.5 million needed to meet the 2030 target. Furthermore, there is tension between EU competition policy and industrial policy: strict state aid rules limit member states' ability to directly support domestic battery manufacturers, while imposing anti-subsidy tariffs on Chinese batteries could raise the cost of domestic vehicles.

Europe's Positioning in Global Competition

Compared to the U.S. and China, Europe's transition path is more complex: it must both preserve the millions of jobs provided by the traditional combustion engine industry and cultivate a completely new supply chain. Data shows that Europe has gained a relative advantage in EV assembly, but in battery manufacturing and material refining, China still holds over 60% of global production capacity with a significant cost advantage. European companies' response strategies include: forming joint ventures with Asian battery manufacturers, accelerating solid-state battery R&D, and promoting domestic mining and refining through the EU's Critical Raw Materials Act.

Bruegel's research specifically points out that the lack of timely and comprehensive clean technology data is a major shortcoming for European decision-making. When public discourse is dominated by news of individual factory closures or layoffs, systematic positive trends (such as net job growth and investment inflows) are often overlooked. The launch of the European Clean Tech Tracker is intended to bridge this information gap, providing a more reliable reference for policymakers and investors.

Long-term Competitiveness: A Three-Pronged Approach Needed

Based on current trends, the competitiveness of Europe's battery and EV industry depends on three key factors:

1. Stable and coordinated policy framework: The 2035 target must remain legally binding, combined with EU-level consumer subsidies and charging infrastructure funds, to avoid fragmented member state actions. 2. Supply chain diversification and localization: Accelerate trade agreements with resource-rich countries such as Chile, Australia, and Africa, while supporting domestic lithium mining and refining projects (e.g., in Portugal, Germany, France). The battery recycling industry also needs to scale up to reduce dependence on primary materials. 3. Technological innovation and cost reduction: Europe still has opportunities in battery chemistry (e.g., sodium-ion, solid-state) and manufacturing efficiency (e.g., dry electrode), but requires closer collaboration among companies, research institutions, and venture capital.If the EU can raise its battery localization rate to over 70% by 2030 while maintaining its advantage in finished vehicle exports, its clean industrialization process will become a global model for green growth. Conversely, if supply chain bottlenecks and cost disadvantages persist, Europe may face a solidified role as an "assembly workshop," hurting both its strategic autonomy and industrial value-added.

Sources

• Bruegel European Clean Tech Tracker, 2025
• Bjerkan-Wade, B., Jugé, M., Keliauskaitė, U., McWilliams, B., Tagliapietra, S. (2026). Tracking the EU Clean Industrialisation Process: A Focus on Batteries and Electric Vehicles. *Intereconomics*, 61(3), 167–173.
• European Commission (2024). Communication on the 2040 Climate Target Impact Assessment.
• European Environment Agency (2024). Transport Greenhouse Gas Emissions Data.
• Delgado, L., et al. (2024). European Clean Tech Trends (Rhodium Group/Bruegel joint report).