Report Launch: Europe is funding its Chinese battery dependence, EIES report warns
Brussels, 1 July 2026 – Beijing has introduced a rewards system for reporting attempts to circumvent its mineral export controls through MOFCOM Announcement 26. Europe’s response: it is wiring its grids, military bases and data centres with battery systems it does not control, built and operated by the same strategic rival – and is spending public money to do so.
A new report from EIES, ‘Jumpstarting Europe's Battery Industry – A Strategy for Energy Security,’ draws on over 30 industry expert interviews to set out how Europe can strengthen its battery industry: build demand for European-made batteries, secure it against foreign pressure, and anchor it to its energy and defence needs.
Albéric Mongrenier, Executive Director of EIES, said: "Electrification can become a pillar of European energy security and strategic autonomy, but battery supply chains are where that principle meets its hardest test. Beyond EVs, batteries are now central to critical energy, digital and security infrastructure. A continent that cannot manufacture the technologies that power its grids and defence systems is neither autonomous nor safe."
Without course correction, Europe forfeits its last realistic chance at a battery industry of its own. As NATO allies raise defence budgets, that spending can either drive demand for European batteries or deepen the dependence its militaries would inherit. The EU’s flagship Industrial Accelerator Act (IAA) faces the same choice: to finally generate the demand European producers need, providing its origin loopholes and cost exemptions are closed. As drafted, it risks handing the market back to the suppliers it was built to displace.
Batteries are no longer a transport-only technology. They are a gateway technology, whose supply chains, processing and know-how feed critical sectors and technologies across Europe's industrial base. A domestic battery industry is therefore a precondition for Europe's industrial resilience.
And the gap is widening. Europe needs up to 600 GWh of installed battery capacity by 2030, almost eight times the current storage capacity. A majority of systems installed today are Chinese-made: the components, materials, cells and, increasingly, the software that runs them. As civilian and military systems share the same cells, materials and equipment, that dependence runs straight into Europe’s defence base, from drones and field communications to munitions, armoured vehicles and microgrids.
Europe's deepest vulnerability is the processing layer between raw minerals and finished cells, where it is least able to produce and most exposed, the “midstream”. Giovanni Cisco, Research Associate at EIES and author of the report, said: "The midstream is where the future of Europe's battery industry is won or lost. Without it, Europe relies on the goodwill of a strategic rival for the refined materials inside every cell, and the industry will only ever scale at the pace China allows."
That dependence is already being used against Europe, with Beijing using export controls as geoeconomic leverage since 2021. In October 2025, it extended them to third-generation lithium iron phosphate, artificial graphite anodes, precursors and the equipment to make them, adding more than two months to delivery for many European firms. Targeting is deliberate: by going after the very inputs Europe needs to build its own capacity, Beijing can throttle today's supply and Europe's ability to escape dependence altogether.
The risk is not only commercial. Chinese suppliers run these grid systems remotely and keep that access for years after installation. A remote compromise could shut batteries down or destabilise the grid on command. In 2025, investigators in the US reported finding undocumented communication equipment, including cellular radios, in Chinese-made inverters and batteries. At a time when Europe's grid is already under strain from hybrid threats and natural incidents, wiring in systems Beijing controls leaves it at the mercy of a state that remains Russia's prime supporter in Putin's brutal and illegal war against Ukraine.
Policy Recommendations include:
Build European, Buy European — Without demand for their products, European producers can never scale. Policymakers should jump-start demand for European-made batteries through localisation criteria to access public procurement and public funding under the EU’s IAA. Cost-exemption loopholes and lax origin rules in the proposed draft weaken the necessary demand signal and should be tightened and simplified. This must be complemented with a step-change in predictable funding in current and future EU budgets, notably by tying funding to verified production and covering operating costs - to reward higher yields and process efficiency.
Fill the Gaps: Invest in the Midstream, Integrate the Chain — Concentrate industrial support on the midstream - the processing layer between raw minerals and finished battery cells, where Europe is weakest and most dependent on one external party. To overcome investor and buyer hesitation, public funding and de-risking tools must be tied to the downstream offtake to create bankable projects that lenders currently consider too risky. This will also ensure that public funds do not support underperforming projects detached from the battery ecosystem.
Raise the Shield, Protect the Market — Activate trade-defence tools to stop subsidised imports undercutting European producers before they reach scale. Apply calibrated, phased tariffs to Chinese batteries and key components and upgrade the EU Foreign Subsidies Regulation (FSR) to screen supply chains proactively rather than on an individual case basis. Europe already has these instruments, it just needs to use them.
Leverage Defence, Strengthen Resilience — Write Allied-origin and security criteria into NATO/EU defence battery contracts and exclude high-risk suppliers of battery components and raw materials from defence and security-relevant systems. Use NATO/EU defence procurement and investment to anchor European-controlled battery supply chains inside Allied critical energy and defence systems.
About EIES
The European Initiative for Energy Security (EIES) advocates for secure pan-European and national energy policies, dedicated to fostering collaboration between government and industry leaders. EIES seeks to address critical energy challenges and champion comprehensive solutions for the benefit of Europe's energy security, transition, and industrial competitiveness. EIES works with the Energy Security Leadership Council-Europe (ESLC-Europe), composed of retired military, former political and active business figures, to achieve these goals.
Media Contact
Tim Kirstein, Associate | EIES
p: tkirstein@secureenergy.org | +49 152 22 40 25 14 | Brussels, Belgium