Strategy "EU and Electromobility: An Unfinished Drama"

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Raw materials, electricity demand, politics: the EU's e-mobility strategy has structural weaknesses - which will be expensive. A guest commentary by Arndt Uhlendorff, Head of the Institute for Rare Earths and Metals.

Europe's indecision on electromobility does not give the automotive industry a competitive advantage. Access to raw materials, on which the energy transition also depends, is crucial. Control over them is still a long way off: in China.

The global pioneer in electromobility is a country that lives from the oil and gas business: Norway. But that's not the only curiosity when it comes to car policy. In 2023, the EU de facto decided to phase out vehicles with combustion engines from 2035, only to do a somersault backwards after just 19 months. Under pressure from the car industry together with Germany, Italy and the Eastern European member states.

This is curious because sticking to the combustion engine leads to higher costs for manufacturers if combustion and electric platforms have to be operated in parallel, which does not sound like a competitive advantage over Chinese competitors. The political U-turn is also the opposite of the clear policy that is so important for industry and investors, which ensures planning security. This is particularly true for the automotive industry, which plans in long cycles of up to 15 years.

But there is another fundamental question: is a complete switch to electromobility even possible? Theoretically yes, according to artificial intelligence. But in practice, the answer is currently rather negative, considering the supply of the necessary raw materials and clean electricity.

Toothless EU Raw Materials Policy

At the beginning of February, the European Court of Auditors published a report in which it scrutinized the EU's raw materials policy. In 2023, the EU adopted a law on critical raw materials, which sets out all kinds of measures with the aim of overcoming the excessive dependence on China and a few other countries for raw materials such as lithium, cobalt, nickel and rare earths. The Court of Auditors' damning verdict on Europe's raw materials strategy was toothless and haphazard.

The World Bank predicts that the green transition will increase demand for raw materials fivefold by 2050. Based on 2020, the EU Commission predicts that demand for lithium, for example, will increase 18-fold by 2030 and that for cobalt will increase five-fold. However, the EU countries will import three quarters of their raw material requirements.

High Losses Due to Shortage of Rare Earths

Nevertheless, governments have failed to back up their grandiose announcements on climate targets in material terms. If China wants to, it will simply strangle European industry. And it wants to, as the export restrictions on rare earths (permanent magnets), gallium and germanium (computer chips) over the past two years have shown.

Thomas Krümmer, rare earths expert and author of the "Rare Earths Observer", estimates the direct and indirect economic losses caused by China's restrictions on rare earths to be at least ten percent of global economic power. All of this has actually been known since 2010, when China first tightened the thumbscrews and triggered the first rare earth crisis - which incidentally led to the founding of the Institute for Rare Earths.

Up to 240 Terawatt Hours More Electricity Needed

And what about the supply of clean electricity? In 2024, there were 260 million cars on the roads in the EU. Of these, only three percent are purely electric, which equates to eight million. They consume around 16 terawatt hours, TWh, of electricity per year. The total electricity consumption of the EU-27 was 2,732 TWh. Around 1,000 TWh or 40 percent of this electricity came from renewable energy sources.

A study by Fraunhofer ISI and the auditing firm PwC predicts that the proportion of e-cars will increase to 30 percent by 2040, which would correspond to an additional electricity demand of around 240 TWh. In order to generate this additional electricity with clean energies, around 120 to 160 gigawatts (GW) of new wind and solar capacity will need to be installed.

However, it is not only transport that will be electrified, but also energy-intensive industries, heating systems for living spaces, such as heat pumps, and, last but not least, data centers will lead to a massive increase in electricity demand, which could therefore rise by 30 to 50 percent overall. That would already be 800 to 1,350 TWh more than today. In order to cover this additional electricity demand with renewables, 470 to 790 GW of renewable electricity capacity would have to be installed over the next 15 years.

Grid Expansion Bottleneck

According to initial estimates, 85 GW of new wind and solar capacity was added in the EU in 2025. If the expansion continues at this rate, the EU could realistically achieve its targets. But solar panels and wind turbines are not the only prerequisite for the green energy transition. The expansion of the grid infrastructure, storage capacities and the implementation of intelligent control systems are other important pillars to ensure that the green electricity generated arrives where it is needed - and to guarantee security of supply.

The expansion of cross-border capacities also plays an important role. However, the massive blackout in Spain, a pioneering country in renewable electricity generation, also illustrates the serious consequences that can result from the slow expansion of domestic and cross-border grid infrastructure.

More Raw Materials Required for Electricity Infrastructure

The investment required in the EU's electricity grids will amount to 1.1 trillion euros by 2040 (approx. USD 1.3 trillion), which equates to 74 billion euros per year (approx. USD 85 billion). This in turn translates into many tons of steel and thousands of kilometers of copper cables. Massive expansion with wind turbines and solar panels will require massive quantities of critical raw materials such as rare earths, silicon, indium and selenium, and lithium, graphite, cobalt and nickel for battery storage.

This brings us back full circle to the issue of the EU's dependence on raw materials and the Court of Auditors' damning verdict: "No sound strategy". So it remains to be seen how the EU intends to achieve the energy transition alongside the transport transition if it cannot secure the raw materials it needs. Perhaps behind the lurching course on the phase-out of combustion engines is a quiet suspicion on the part of politicians that the EU will probably not be able to close the gap in the race for critical minerals.

*Arndt Uhlendorff is head of the Institute for Rare Earths and Metals based in Lucerne, Switzerland