Europe’s Auto & Battery Industry: Revolutionary Change – or Extinction
Policy Recommendations
Concrete policy recommendations include, but are not limited to:
• European companies should prioritise partnerships with Japanese and Korean battery makers for know-how, technology transfers and to achieve scale, leveraging their reliability and strategic alignment with Europe’s interests. While partnerships with Chinese firms may be unavoidable, they should be tightly regulated.
• Strengthen and synchronise Foreign Director Investment screening and other investment defence instruments to safeguard economic and security priorities in these collaborations. Alignment with Europe’s allies, particularly the U.S., should be sought to prevent disjointedness and secure mutual market access.
• Europeans will own 51% or more of each joint venture, including voting rights, governance and IP. Each joint venture or other type of agreement would feature a master timeline for more value-added operations to Europe, including investment in European supply chains.
• The joint ventures will inevitably be messy, with foreign investors working hard to comply with but work around the rules. Europe will need to develop a highly experienced audit team to check on operations every quarter and report on progress.
• Europe should implement a 50% tariff on imported batteries, gradually phasing this in over a five-to-seven-year period to allow time for companies to scale up local production and compete effectively. Tariffs should be aligned with investments in the supply chain and related regulatory measures to create a competitive environment for European battery manufacturers.
• Europe should implement a tariff schedule with higher tariffs on finished cells and components, while maintaining lower, incremental tariffs on raw materials like lithium and graphite to avoid disrupting domestic production. Incentives should encourage extraction, processing, and refining within Europe and through strategic partners.
• Europe should learn from the U.S. IRA. The IRA and Chips Act have ignited a storm of new investments, totalling $500 billion. Spread over 10 years and tightly monitored and controlled, Europe should invest €100 billion in:
• €20 billion should go into new advanced battery gigafactories with Korean and Japanese partners in Europe.
• €10 billion for software / battery management startups.
• €20 billion in research and development (R&D) into next generation battery chemistries.
• €20 billion should be directed into the cathodes, anodes, separators and electrolyser companies.
• €10 billion into materials recycling companies.
• €10 billion into software companies with expertise in autonomous driving and cybersecurity