Energy Transition | European Battery Manufacturing: Charging Ahead

The Potential Oversupply Facing Europe’s Booming Battery Industry

Europe is responsible for around 3% of the world’s lithium-ion battery production, and was a net importer in 2020.

In this article, our experts share perspectives on how this potential overcapacity, and other risks, could impact the European battery manufacturing industry and its stakeholders.

FTI Consulting estimates that European battery production capacity will soar tenfold in five years, to exceed 300 GW by 2025. This will likely outpace even ambitious European vehicle electrification forecasts, and manufacturers will likely be left with a European surplus as early as 2023-24.

This surplus will have positive consequences for EV OEMs, as this increased local competition will likely result in battery prices falling as forecast. It is also an opportunity for laggard OEMs to join up with local battery manufacturers, as so many OEMs are already doing, to guarantee supply and prices. For governments, the increased production will result in a windfall of almost 100,000 new jobs and tilt the balance of trade in batteries back in their favour. However, a number of these new factories will be built by the Asian battery giants, which could result in strategic supply issues.

For European battery manufacturers and their stakeholders, several key steps should be taken to avoid losing market share:

Invest in R&D, to ensure a stake in future technologies such as solid-state batteries or cheaper manufacturing techniques, and avoid being undercut by other producers.
Analyse the export market carefully, and leverage their high regulatory standards to select key markets where they are most likely to beat the incumbent Asian exporters.
Engage in tie-ups with OEMs and other clients as much as possible, to secure demand as well as investments.