Batteries and Electric Vehicles in the EU's Clean Industrialization Process: Achievements and Concerns

Battery and Electric Vehicles in the EU's Clean Industrialization Process: Achievements and Concerns

Against the backdrop of global geopolitical tensions and climate agenda pressures, the EU adheres to a path that balances green transition with economic competitiveness. At the core of this strategy, the battery and electric vehicle (EV) industries are seen as key indicators of the success or failure of clean industrialization. However, recent data from the European Clean Tech Tracker released by Bruegel reveals a complex reality: the EU has made significant progress in the EV sector, but vulnerabilities in the battery supply chain could jeopardize long-term strategic autonomy.

EV Adoption Accelerates, but Cost Remains a Bottleneck

The EU's electricity system is decarbonizing rapidly—clean energy accounted for 71% of generation in 2024, up 13 percentage points from a decade ago. However, the electrification rate of end-use sectors has stagnated at around 23%, far from the 51% (by 2030) and 62% (by 2050) needed to meet climate targets. The transport sector is a major drag, with an electrification rate of only 2%, almost entirely from electrified railways.

On the positive side, EV registrations hit a record high in 2025, accounting for a quarter of monthly new car registrations on average. Nordic countries are leading (with shares exceeding 55% in Norway, Iceland, etc.), while the four major markets of France, Germany, Italy, and Spain have also accelerated growth since the end of 2024. But price remains a barrier to mass adoption: the average EV price in Europe exceeds €50,000, and models under €30,000 are scarce. The EU's tariffs on imported Chinese battery electric vehicles protect domestic manufacturers but also limit the supply of affordable models.

Manufacturing Capacity Expands Rapidly, but Battery Shortcomings Are Evident

The EU's EV assembly capacity already exceeds domestic demand, but battery cell production capacity is still insufficient and heavily dependent on foreign companies and imported raw materials. Data show that the EU is a net exporter of EVs but a net importer of batteries. This trade pattern vividly reflects Europe's industrial strength—vehicle manufacturing—and its fragile weakness in the upstream supply chain.

From an investment perspective, the 2035 zero-emission vehicle target provides certainty for the industry and attracts significant capital. However, if demand-side policies (such as charging infrastructure and consumer subsidies) are not promptly aligned, the risk of overcapacity will increase. Meanwhile, the battery supply chain remains highly concentrated (especially for key minerals like cathode materials and graphite), and the EU's diversification efforts have yet to fundamentally change the dependency pattern.

The Dilemma of Policy Support and Strategic Dependence

The EU's Clean Industrial Deal aims to combine decarbonization with reindustrialization. Progress in the battery and EV industries proves that a stable and predictable regulatory framework (such as the 2035 ban on internal combustion engines) can indeed stimulate investment. But Bruegel's research also sounds a warning: if only the manufacturing side is focused on while ignoring supply chain resilience and demand-side drivers, green growth may turn into "green re-dependency"—from dependence on fossil fuels to dependence on clean technology imports.

Currently, the construction of EU battery capacity relies mainly on foreign companies (such as CATL and LG Energy Solution) setting up factories in Europe, while local companies (such as Northvolt) still face technological and scaling challenges.Currently, the EU's battery capacity construction mainly relies on foreign companies (such as CATL and LG Energy Solution) setting up factories in Europe, while domestic companies (like Northvolt) still face technological and scaling challenges. The processing of critical minerals is almost entirely controlled by China. This structural asymmetry means that while the EU enjoys a trade surplus in electric vehicle exports, it must bear the strategic risks brought by a trade deficit in batteries.

Outlook: A Comprehensive Policy Toolbox Needed

Bruegel emphasizes that to maintain industrial competitiveness and reduce strategic dependence, the EU needs a three-pronged approach: 1. Demand-side incentives: Expand the supply of affordable models, accelerate the deployment of charging stations, and provide targeted subsidies for low- and middle-income households; 2. Supply chain diversification: Diversify mineral sources through critical raw materials legislation and trade agreements, while supporting European domestic refining capacity; 3. Targeted trade measures: Tariffs should avoid excessive protection and can be combined with the Carbon Border Adjustment Mechanism (CBAM) and green subsidies to balance fair competition with consumer interests.

The EU's clean industrialization path is not smooth. The story of batteries and electric vehicles is both a microcosm of the German automotive industry's transformation and a touchstone for Europe's pursuit of strategic autonomy. The key in the coming years is whether it can maintain openness and the pace of change while protecting its industrial base—after all, the competitors in this race have not stalled.