EIES and T&E organised a Chatham House rules workshop on 20 March 2025 with senior policymakers, industry representatives and clean tech manufacturing, and security experts to discuss how the EU can set an effective framework to manage risk and require technology and skills transfer from Chinese clean tech investment. 

Executive Summary

The workshop featured two key presentations, Dunne Insights’ report for EIES, ‘Europe’s Auto & Battery Industry: Revolutionary Change - Or Extinction’, and Transport & Environment’s analysis ‘Assembly plant or battery powerhouse?’, setting the stage to discuss existing and new policy measures to ensure that Chinese battery and EV investments in the EU deliver local benefits.

China dominates the battery industry, from EV to battery and cell manufacturing down through materials processing and control of key mining operations, ultimately producing 70–90% of the world’s battery components. 60 to 95% of the EU’s critical raw materials and rare earth elements used across strategic technology sectors come from China. In Europe, existing European-Chinese corporate agreements in the automotive-battery sector do not include provisions for know-how or tech transfers.

To secure its competitiveness and strategic autonomy, the EU needs to enforce tighter regulations and harmonise trade and investment policy instruments to scale up and protect strategic technologies such as battery manufacturing. Europe should adopt a strategy that combines defensive measures such as trade defence instruments with offensive actions like local content requirements, production support, and stronger enforcement of EU rules. Local benefits and innovation should guide policies, ensuring that Europe remains a leader in clean technology and battery manufacturing by building a robust domestic battery ecosystem.

Key insights and recommendations from the discussion include:

Scale up Domestic Manufacturing

• Europe must act swiftly to secure its automotive industry's economic security and competitiveness by scaling up domestic battery manufacturing, in particular by putting in place dedicated production aid for European gigafactories as mentioned in the Automotive Industrial Action Plan, and reducing its reliance on unreliable external supply chains.

• In responding to competition from China, the EU should avoid relying only on protectionist approaches but also support scaling efforts through state aid, production credits, and strong but simplified sustainability rules.

• Efforts to scale up battery manufacturing should bring local benefits. Europe should employ offensive policies such as targeted production support and conditionality for investments like local content requirements, local workforce hiring and training obligations, and integrated supply chains up to materials.

• The EU can take lessons from and build on successful models like the US Inflation Reduction Act (IRA). The US IRA provides valuable insights for Europe, which should tailor support mechanisms to fit its specific needs and regulatory environment. Similarly to the IRA, subsidies should be linked to output indicators, e.g. X Kw/hr.

• Europe should improve the design of the incentives to avoid regulatory complexity, notably through the upcoming reform of the state aid guidelines. Funds allocation and tax support should be streamlined and attached to simple but strict conditionality with strong oversight, e.g. as done in Sweden for foreign direct investments.

Use Leverage and Trade Defence

• Europe should utilise a diverse range of tools at its disposal to ensure the competitiveness of its battery manufacturing. These include trade defence measures, anti-subsidy investigations and foreign direct investment screenings, e.g. following the model of the US Committee on Foreign Investment, which restricts Chinese investments in strategic sectors.

• Access to the EU Single Market and the implementation of strategies to protect European interests will serve as leverage against trade weaponisation and economic dependency. E.g. GM has been forced to cooperate with CATL as a condition for accessing the Chinese market since 1996.

• Europe should learn from Chinese companies through technology transfers and forming majority-owned European joint ventures (JVs). Yet, current European-Chinese agreements do not include tech transfer provisions, largely because there is no EU or national framework to empower European companies to negotiate those.

• Europe will have to use its market access leverage to promote tech transfer within majority-owned European JVs, following the example of Tesla’s licensing deal with CATL, made possible by the US admin leveraging access to its domestic market.

• Preventing legal loopholes and enforcing JVs and tech transfers will be difficult as non-compliance frequently occurs, which requires strict enforcement from member state authorities. National deviations, like Hungary's alleged environmental derogations for foreign battery manufacturing operations, should be addressed through stronger EU alignment and enforcement mechanisms, including prioritising the better policing of JVs, in part to avoid unhealthy competition among MS.

Building Tech Sovereignty and Resilience

• Europe should not rely on one technology nor on one country. It must prioritise developing its own clean technological capabilities, particularly in battery chemistry, to reduce over-reliance on Chinese technology.

• Certain US automakers have long recognised the risks associated with partnering with Chinese battery makers, preferring partnerships with South Korean firms in favour of long-term security of supply.

• Complementary to using market access leverage and tech transfers through JVs, the EU needs to remove barriers within the Single Market, e.g. enhanced oversight should include stricter control of black mass and scrap metal exports, while barriers including on black mass shipments within the EU should be eased.

• In using its market access as leverage in negotiations with China, EU member states must collaborate to withstand significant pushback and obtain favourable deals from Chinese battery and auto industry.

• Europe must reduce its dependence on Chinese clean tech by diversifying its raw materials partnerships with like-minded partners and leveraging access to its single market. While collaborating only with like-minded partners would be ideal, China’s supply chain dominance and technical innovation make it impossible to ignore, and trade between the blocs will continue to play an important role.

• As part of building resilience, recycling of critical materials should be kept in Europe, which requires updated policy support: linking recycling content to local requirements would strengthen European recycling. Making Europe a leader in recycling and circularity would enable it to significantly reduce its dependence on Chinese raw materials and supply chains while simultaneously strengthening its industrial base.