China's strategy reveals the failure of Western economic policy, as exemplified by battery storage – Image: Xpert.Digital
Europe's battery dilemma: Strategic failure in the shadow of Chinese dominance
Diagnosis of a crisis: Robin Zeng's unvarnished criticism of Europe's battery industry
The criticism leveled by Robin Zeng, the Chinese world market leader in batteries, against the European battery industry hits the nail on the head regarding a fundamental economic policy misstep. The founder and CEO of Contemporary Amperex Technology Co. Limited, better known as CATL, offered a diagnosis in a remarkable interview with Norwegian hedge fund manager Nicolai Tangen that goes far beyond polite diplomatic platitudes. His statement that Europeans are currently making almost every mistake at once is not exaggerated polemic, but rather a sober assessment of an industry on the verge of losing one of its most important future technologies to non-European competitors.
Zeng's criticism focuses on three fundamental points. First, European battery manufacturers employ flawed design concepts. Second, they use ineffective processes. Third, they utilize unsuitable equipment. This triad of deficiencies makes mass production virtually impossible. These shortcomings didn't arise overnight, but are the result of years of neglecting a key technology. Zeng's assertion that Europeans are making all these mistakes simultaneously is a harsh but fair diagnosis. Incorrect design concepts point to a lack of technological expertise. Inadequate processes reveal a lack of production know-how. Inadequate equipment indicates insufficient investment and flawed planning. These three deficiencies combined make competitive mass production impossible.
The shocking reality: China's overwhelming dominance and Europe's empty promises
The scale of this problem can hardly be overstated. With a market share of approximately 38 percent, CATL controls more than a third of the global market for electric vehicle batteries. This dominant market share makes the company almost twice the size of the second-largest manufacturer, BYD, also from China, which holds about 18 percent. The South Korean manufacturers, most notably LG Energy Solutions with around 10 percent, follow at a considerable distance. Europe, on the other hand, has virtually no significant independent battery manufacturers of global standing. This market structure did not arise by chance, but is the result of deliberate industrial policy decisions made in China more than 15 years ago.
The consequences of these structural deficiencies are evident in the sobering reality of European battery production. While production capacities of 2,000 gigawatt-hours were originally announced for 2030, the Fraunhofer Institute for Systems and Innovation Research realistically estimates only 800 to 1,100 gigawatt-hours. Demand is estimated at 800 to 1,300 gigawatt-hours during the same period. In 2024, Europe achieved a production capacity of just around 124 gigawatt-hours.
These figures illustrate a fundamental discrepancy between ambition and reality. Of the announced projects, 700 gigawatt-hours of capacity have already failed or been significantly delayed, a third of them in Germany alone. The Swedish company Northvolt, once hailed as a European beacon of hope and supported with €600 million in German subsidies, filed for insolvency in March 2025. The company's debts amounted to approximately nine billion US dollars. This collapse was not a sudden event, but rather the result of a chain of production problems, quality defects, and delivery delays that ultimately shattered investor confidence.
The insolvency of Northvolt symbolizes a larger problem. European players have failed to close the technological gap with Asian manufacturers. Experts estimate the lead held by Chinese and South Korean battery manufacturers at 15 to 20 years. This lag is not primarily a question of technological brilliance, but rather a consequence of differing industrial policy priorities and investment cycles. China recognized the strategic importance of battery technology for the energy transition and electromobility early on and systematically invested in building a complete value chain. Northvolt's insolvency is symptomatic of this failure. While the company received government support and private investment, the framework for successful scaling was lacking. Technological problems could have been overcome with more patience, expertise, and financial resources. Instead, the pressure to deliver quick results, combined with rising costs and weak demand, led to insolvency. This case demonstrates that piecemeal support without a coherent overall industrial policy is doomed to failure.
The contested supply chain: China's strategic control from raw materials to cell manufacturing
Chinese dominance extends beyond battery cell production itself, encompassing the entire supply chain. China controls approximately 80 percent of global lithium-ion battery production. For lithium iron phosphate batteries, a more cost-effective chemical variant, the Chinese share exceeds 98 percent. This dominance is even more pronounced in raw material extraction and processing. Chinese companies control 29 percent of global lithium mining, despite the largest deposits being located in Australia and Chile. The Chinese share increases dramatically in refining and further processing. Europe, on the other hand, possesses virtually no significant foreign lithium reserves and is almost entirely dependent on imports.
This strategic dependence is the result of deliberate political decisions. With the Made in China 2025 initiative, the Chinese government has presented a comprehensive plan to achieve technological leadership in key industries. The battery industry is at the heart of this strategy. State support is provided on several levels. Direct subsidies for manufacturers like BYD increased from approximately €220 million in 2020 to €2.1 billion in 2022. However, these figures capture only a fraction of the actual support. Conservative estimates put China's total industrial subsidies in 2019 at around €221 billion, equivalent to 1.73 percent of its gross domestic product.
More than 99 percent of listed companies in China received direct government subsidies in 2022. This was supplemented by preferential loans from state-owned banks, preferential access to raw materials, tax incentives, and a coordinated public procurement policy. China also plans to invest an additional €750 million in research and development of solid-state batteries, the next generation of energy storage devices. These sums stand in stark contrast to European investments. While China is creating a coherent and long-term ecosystem, Europe is reacting in a fragmented, short-term, and often belated manner. The Chinese strategy is based not only on government support but also on a massive expansion of educational capacities. Universities have been specifically equipped with resources, research centers have been established, and collaboration between academia and industry has been institutionalized.
The dependence on raw materials further exacerbates the situation. Europe has no significant lithium reserves of its own and is almost entirely reliant on imports. While the US and China are expanding their control over the supply chain by acquiring mines and refineries in Australia, Chile, Indonesia, and the Democratic Republic of Congo, Europe is lagging behind. Although the European Critical Raw Materials Act aims to extract at least 10 percent of strategic raw materials domestically and process 40 percent by 2030, the path to achieving this goal is fraught with obstacles.
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Why Europe's battery industry is powerless against the USA and China – How Europe can still regain its battery supremacy
European Achilles heels: High costs, skills shortage and US competition
However, Europe's structural competitive disadvantages extend beyond the level of subsidies. Energy costs play a central role. Following the introduction of the US Inflation Reduction Act in August 2022, the average price of battery packs in Europe was already about eight percent higher than in the US and 33 percent higher than in China. The energy crisis resulting from the war in Ukraine dramatically exacerbated this situation. Battery prices in the EU rose by a further 10 to 12 percent, while the US, through massive tax breaks and subsidies, was able to reduce costs to Chinese levels. The resulting price difference of approximately 40 percent makes competitive production in Europe virtually impossible.
The US Inflation Reduction Act, with a volume of approximately $135 billion for electric vehicles, critical minerals, and battery production, has fundamentally altered the global competitive landscape. The law ties tax breaks and subsidies to local production and supply chains. For example, 40 percent of battery minerals must originate from the US or from countries with free trade agreements. Half of all battery components must be manufactured in North America. These protectionist measures have already had a concrete impact on Europe. Tesla relocated its planned battery cell production from Grünheide in Brandenburg, Germany, to the US. Originally, the German site was intended to have a peak capacity of over 50 gigawatt-hours per year. These plans were abandoned in 2023 due to the more attractive tax environment in the US.
A central point in Zeng's criticism concerns the European education system. His statement that Europe is not training enough creative specialists in the field of electrochemistry hits a nerve. The number of first-year students in electrical engineering and related STEM subjects has been declining in Germany for years. At the same time, the baby boomers are reaching retirement age, exacerbating the skills shortage. Many students are turning away from technical degree programs because they expect faster careers and higher salaries in other fields such as finance. This trend is particularly problematic because battery technology is a highly specialized field requiring years of training and practical experience. CATL alone employs around 20,000 experts in research and development. This number exceeds the total academic capacity of many European countries in this area. More than a decade ago, Zeng had already advised then-Chancellor Angela Merkel to invest in the training of electrochemistry students. This recommendation largely went unheeded.
Europe's response to these challenges has so far been inadequate. While various funding instruments have been created, their implementation suffers from bureaucratic hurdles, regulatory uncertainty, and a lack of coordination between member states. The European Battery Alliance EBA250 has formulated ambitious goals, but practical implementation lags behind the announcements. Many projects fail in the financing phase because investors are risk-averse in light of global competitive conditions. High capital costs, rising construction costs, and uncertainty about future demand further hinder private investment.
The strategic embrace: CATL's expansion and Europe's dependency trap
The consequences of these oversights are evident today in the dependence of European automakers on Chinese suppliers. BMW has been working with CATL since 2012. Mercedes-Benz and Volkswagen are also major customers. CATL has systematically expanded its presence in Europe. In Arnstadt, Thuringia, the company has been producing battery cells with a capacity of 50 gigawatt-hours since 2022 and employs 1,700 people. A factory with a planned capacity of 100 gigawatt-hours, expected to create around 9,000 jobs, is currently under construction in Debrecen, Hungary, with an investment of €7.3 billion. In Spain, CATL is planning another plant with a capacity of 50 gigawatt-hours in partnership with Stellantis.
From a Chinese perspective, this expansion of Chinese manufacturers into Europe is a logical consequence. On the one hand, it circumvents potential trade barriers and tariffs; on the other, it positions them close to their most important customers. From a European perspective, however, this development is ambivalent. While jobs and added value are created in Europe, technological control and profits largely remain with Chinese companies. European car manufacturers are effectively becoming mere assemblers, sourcing the crucial component of their products from a supplier who could potentially become a competitor.
This danger is not hypothetical. CATL is already developing its own platforms for electric vehicles, the CATL Intelligent Integrated Cockpit, which includes not only the battery but also cooling and braking systems, powertrain components, and suspension systems. This puts the company in direct competition with platforms like Volkswagen's modular electric drive matrix (MEB). What begins today as a supplier relationship could tomorrow transform into a cutthroat competition in which European manufacturers are structurally disadvantaged.
Developments in solid-state batteries, considered the next generation of technology, are exacerbating these concerns. China plans to achieve a production capacity of 156 gigawatt-hours for this technology by 2030. The US is projected to reach approximately 120 gigawatt-hours, while Europe is expected to achieve only 33 gigawatt-hours. In 2024, the Chinese government launched the China All-Solid-State Battery Collaborative Innovation Platform, an alliance of leading battery and automakers, to systematically accelerate the commercialization of this technology. European manufacturers such as Mercedes-Benz and Stellantis are attempting to catch up through partnerships with US startups like Factorial Energy, but the gap remains substantial.
Battery dependency: How Europe is jeopardizing its industry
These conflicts between economic necessities and environmental and social concerns are characteristic of the European situation. While China pragmatically pushes through resource extraction projects and the US creates incentives through subsidies, Europe struggles with lengthy approval processes, strict environmental regulations, and a skeptical public. These factors are not inherently negative, but they hinder the rapid development of domestic capacity in a global race where speed is increasingly crucial.
The geopolitical dimensions of this dependence are considerable. The US placed CATL on a Pentagon blacklist in 2025 and plans to prohibit governments from purchasing Chinese batteries altogether starting in 2027. Europe finds itself caught between economic interdependence with China and security concerns. The energy crisis has demonstrated how vulnerable economies become when they depend on single suppliers. In the case of gas, it was Russia; in the case of batteries, it could be China. A hypothetical export ban or a politically motivated shortage could plunge the European automotive industry and the energy transition into an existential crisis.
The economic costs of this dependence are already being felt. According to calculations by the consulting firm Deloitte, in 2024 only 13 percent of the world's batteries were manufactured in European factories, and of those, 97 percent came from branch plants of Chinese and South Korean manufacturers. Only one European manufacturer produced its own batteries, and even then, only on a limited scale. 70 percent of global production was accounted for by China. Sales of electric vehicle batteries in Europe are expected to rise from approximately €16 billion in 2024 to €54 billion in 2030. However, if current trends continue, this growing market will be largely controlled by non-European players.
The question is not whether Europe should establish its own battery production, but how this can still be achieved. The current strategy of relying on market forces and moderate subsidies has proven insufficient. The combination of high energy costs, lower subsidies than in the US or China, bureaucratic hurdles, and a shortage of skilled workers makes Europe an unattractive location for capital-intensive battery production. Without fundamental changes in industrial policy, Europe will cement its dependence.
Setting the course for the future: A strategy for regaining battery sovereignty
A successful strategy would need to include several elements. First, it requires massive and long-term financial support that can compete with American and Chinese subsidies. European budget rules would need to be relaxed to allow for strategic investments. Second, bureaucracy must be radically simplified and accelerated. Approval processes that take years are not competitive in a dynamic technology field. Third, energy costs must be reduced, for example through targeted electricity price subsidies for energy-intensive industries or the accelerated expansion of renewable energies with industrial priority.
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