Battery Technology Comment: Europe's Last Chance in the Battery Era

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Europe is at a decisive moment with batteries: China's 15-year lead can only be overcome through radical innovation. Salvation may be on the way. A guest commentary by Jozsef Bugovics.

The starting position of the European automotive industry in the battery sector is characterized by structural disadvantages: Chinese players have massively subsidized their battery industry for 15 years, growing from small to very large GWh factories. Additionally, they control access to strategically important raw materials such as lithium, cobalt, nickel, and manganese, giving them cost and technological leadership in modern NCA, NMC, and L(M)FP cells.

Subsidies, Production Volume, And Raw Materials

The development in China was specifically supported by government subsidies, even violating WTO regulations, allowing for efficient scaling of production and reduction of defect rates at high volumes. This has created a market situation for European manufacturers where entering their own cell production ("MeToo product") would result in enormous losses during the initial years until the necessary volumes and production efficiency are achieved. The reality following this is that, even after this massive investment phase, they would remain the "second best" compared to the established Chinese gigafactories.

Therefore, OEMs and suppliers in Europe are hesitant to take such risky paths. Policymakers are increasingly frustrated by the cautious investment decisions of industry players: attempts like Porsche's cell production and Northvolt's initiatives have been announced multiple times and then partly withdrawn because the economic risks ultimately cannot be justified.

China's Battery Strategy for Europe

Chinese companies are already responding to anticipated regulatory pressure. They are building subsidized factories locally in Europe while simultaneously bringing raw materials from China to secure their competitive position. The development of their own value chain explicitly intersects with European funding initiatives and impending regulations: China is a WTO member but does not adhere to the rules itself, while demanding free market access from others and simultaneously disregarding intellectual property.

Since 2023, China has increasingly supported its electric vehicle manufacturers through indirect subsidies such as tax refunds and other covert state aid aimed at distorting global competition and gaining market share. This practice violates WTO rules as it creates unfair competitive conditions. Following an investigation, the European Commission decided in 2024 to introduce countervailing duties, as the entire value chain for battery-electric vehicles in China benefits from unlawful state subsidies.

Europe's Only Way Out is Massive Innovation

A copy of the Chinese strategy makes no sense for Europe for the reasons mentioned. The European automotive industry needs an independent and superior battery technology to reclaim its position at the top of the global market and compete against affordable Chinese electric cars. It should always be kept in mind that technological and market leadership in lithium-ion batteries has already shifted three times in the past 30 years: from Japanese companies to Korean ones, and currently to Chinese firms. Another ten years have passed—and the fourth shift is on the horizon.

Such a superior technology already exists: European players have developed an industrially mature and mass-production-compatible process for the use of 100-percent silicon anodes—without reliance on Chinese-controlled raw materials like synthetic graphite. This approach could extend lithium-ion battery technology, outperforming all current cells both in terms of cost and performance.

The advantages are substantial: energy densities over 50 percent higher compared to today's reference cells, charging speeds above 6C for significantly faster charging, and noticeably lower costs per kilowatt-hour. Savings on raw materials alone exceed 11 dollars per kilowatt-hour due to the elimination of graphite and other materials. Moreover, the CO₂ footprint is significantly lower per kWh of battery produced. Another advantage: the raw materials required for the silicon anode and battery are predominantly available in Europe—a strategic relief that drastically reduces import dependency.

Combinations of LFP cathodes and silicon anodes are now achieving volumetric performance levels previously only possible with optimized NCM cells. If Europe manages to scale this technology, it would not only catch up with China but also have the opportunity to set the pace for a new technological competition over the next 10 years. This time, the intellectual property is in Europe, and it remains to be seen what measures politics will take to protect it.

Industrial Dimension And Financing

However, building up its own capacities remains a financial and organizational mammoth project. Experts estimate that Europe would need about one terawatt-hour of production capacity for complete self-sufficiency—that is, 1,000 gigawatt-hours. This would require factories on the scale of 50 to 100 gigawatt-hours each. A single facility demands an investment volume of between four and eight billion euros.

This is where the critical deficit lies: Europe lacks the experience to immediately guarantee low defect rates, nor can it draw on 15 years of systematic subsidy support and consistent industrial policy, as seen in the Chinese automotive industry. This necessarily means that the first factories will come with a learning curve and associated costs. Without political measures to cushion early losses and make risks calculable for investors, scaling up cell production in Europe will remain nothing more than wishful thinking.

What is needed, therefore, is a credible risk mitigation mechanism. Only if CapEx investments can be predictably refinanced does a sum of eight billion euros per factory become feasible at all. Only then does the automotive industry's decision effectively boil down to weighing whether to bring the value chain—up to 35 percent of the vehicle—back in-house. For comparison: in the era of the combustion engine, the value creation for engine and transmission was roughly in this range. The development and manufacturing sovereignty of a key future technology like battery technology must therefore never be relinquished.

Speed As A Key Factor

But the real challenge is less about the level of technical maturity and more about the speed of execution. Factories at the 50 to 100 GWh scale can bring products to market in about two years. However, the planning of today's vehicle projects already requires a clear answer to the question: Will European cells be available in two years?

The political course must therefore be set in the coming months. Otherwise, the "solar cell moment" looms: a high technology developed in this region but then relocated to Asia due to hesitant execution and a lack of industrial policy—leaving Europe on the sidelines.

In the debate, some ideas may still seem ambitious or unrealistic. But decisions are not made in a theoretical space. If competitors like Tesla, Panasonic, or LG were to take over European patents and IP, this could mean that battery cells would not only be produced more cheaply but also with technical superiority outside of Europe. This would leave the industry once again facing the bitter experience of having relinquished the lead in raw materials and technology that we had created in Europe.

The conclusion is clear: If Europe now relies on the combination of 100-percent silicon anodes, LFP cathodes paired with specifically secured financing, the region can drastically reduce its dependency, build its own gigafactory infrastructure, and technologically return to the global forefront.

Only through immediate action will the industrial, economic, and security backbone of the European automotive industry remain viable in the era of e-mobility—Europe is unlikely to get a second chance.

Jozsef Bugovics is a partner at Pava Partners, one of the M&A and debt advisory firms for technology-driven mid-sized companies. Bugovics was the CEO and founder of several technology companies, such as MeTechnology AG (later Brokat AG), and has been advising technology companies since 2001, focusing on sustainability tech, renewable energy, digitalization, and automotive.

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