Europe’s battery sector stands at a critical juncture, bolstered by strong political and industrial momentum aimed at building a resilient regional EV supply chain. However, financial stakeholders continue to grapple with significant technological, operational, and commercial risks. Large-scale battery projects, or gigafactories, face complex ramp- up challenges, uncertain demand for EVs and specific chemistries, and a heavy reliance on Chinese-controlled supply chains.

Non-recourse financing introduces additional constraints, making it difficult to achieve investment-grade ratings during the construction phase without long-term offtake agreements from original equipment manufacturers (“OEM”) and well-defined industrial strategies. Lenders must carefully navigate trade-offs between product specialization, portfolio diversification, and cost competitiveness, while prioritizing projects that demonstrate clear industrial viability and strong stakeholder commitment.

Encouragingly, emerging clusters such as “Battery Valley” in northern France signal early progress toward establishing a sustainable and strategically independent European battery ecosystem. Beyond France, multiple large-scale projects across Germany, Spain, and Hungary suggest that Europe’s industrial pipeline has the potential to close a significant portion of its future demand gap. If these projects achieve timely ramp- up and secure stable offtake agreements, Europe could position itself as a credible counterweight to Asian and US battery dominance.

Despite early signs of progress, Europe faces a pivotal challenge in scaling its manufacturing capacity to meet the accelerating demand from the expanding EV market. The region accounts for roughly 25% of global battery demand but only about 10% of global production capacity, leaving it highly dependent on imports and exposed to geopolitical risks and cost volatility. Operational challenges, including delays and ownership changes at key projects, highlight structural vulnerabilities across the European gigafactory landscape.

Uncertainties around specific battery chemistries, higher production costs relative to Asia, and supply chain concentration in China further emphasize the urgency for Europe to accelerate gigafactory development, secure long-term offtake agreements and foster a resilient industrial base capable of meeting the EU’s 2030 zero- emission vehicle (“ZEV”) targets. Even fully independent European gigafactories remain heavily reliant on Chinese-controlled supply chains—such as the near-monopoly over anode production—making them vulnerable to geopolitical tensions in the US–China– Europe trade relations.

Despite setbacks from high-profile start- ups such as Britishvolt, Northvolt, and CustomCell, Europe remains committed to scaling its battery production. Continued progress will depend on forging strategic partnerships, accelerating innovation in manufacturing processes, and reducing supply-chain vulnerabilities. If these efforts are sustained, Europe can build a more resilient and competitive battery ecosystem, positioning itself to meet rising EV demand while gradually reducing its dependence on imports.

Despite recent advancements, Europe’s battery production pipeline continues to fall short of its own electrification goals and still lags behind global competitors. China controls over 75% of global Li-ion cell manufacturing, while the US has turbocharged domestic investment through the IRA. In contrast, fragmented policies, elevated energy costs, and prolonged permitting processes have hindered the pace of factory deployment across Europe. By 2030, Europe’s battery demand is expected to approach 1,000GWh, but the region currently has just over 300GWh of operational manufacturing capacity in place. This significant gap leaves Europe dependent on imported materials, with China remaining the dominant supplier.

To achieve the NZIA target of producing 40% of its battery demand domestically, Europe will need an additional 200GWh/year of manufacturing capacity by 2030. Meeting the EBA goal of 550GWh/year requires an even larger scale-up—roughly 250GWh/ year of new capacity. While the announced project pipeline indicates that these targets are attainable, a significant portion of the planned capacity remains under non- European ownership. This underscores the urgent need for a strategic onshoring approach to safeguard Europe’s autonomy and secure a reliable domestic supply

Multiple factors are propelling the rise of gigafactory projects across Europe. Regulatory mandates such as the EU’s “Fit for 55” package and the 2035 ZEV targets are pushing automakers to rapidly electrify their fleets. The planned phase-out of internal combustion engine sales, along with binding CO2 reduction targets, creates long-term clarity for investors and OEMs. In response, leading manufacturers including Volkswagen, Stellantis, Renault, and BMW have committed billions to EV platforms, creating surging demand for localized cell production.

This wave of investment is reinforced by a supportive policy and funding environment. The EU Green Deal Industrial Plan has streamlined permitting processes and relaxed state aid rules, while national subsidy programs—from France’s €1 billion allocation to ACC to Spain’s Proyectos Estratégicos para la Recuperación y Transformación Económica (Strategic Projects for Economic Recovery and Transformation) (“PERTE”) EV grants—are drawing in battery and EV manufacturing projects. Collectively, these measures integrate regulatory pressure, industrial investment, and financial incentives to accelerate the rollout of gigafactories across Europe.

Another key driver lies in Europe’s structural advantages. Markets such as Spain, France, and Sweden offer abundant low-carbon energy potential, enabling sustainable cell production that is increasingly vital for Environmental, Social, and Governance- conscious (“ESG”) automakers and investors. Europe’s stringent ESG and sustainability standards, while requiring careful compliance, further enhance the credibility and global attractiveness of European battery projects. At the same time, proximity to established automotive clusters in Germany and cost- competitive assembly bases in Eastern Europe creates an integrated EV value chain that strengthens the business case for local cell production.

To overcome these challenges and enhance resilience, the European Union has progressively developed a robust industrial framework for the battery sector. Over the past decade, it has strategically integrated industrial policy, regulatory measures, and financial instruments to strengthen the global competitiveness of Europe’s battery industry.

The policy journey commenced with the Strategic Energy Technology (“SET”) Plan, which, as early as 2007, recognized breakthroughs in energy storage technologies as critical to achieving decarbonization goals. A 2015 revision sharpened this focus: among its ten priority actions was a dedicated objective for the EU battery sector to achieve global competitiveness, positioning it as a cornerstone of Europe’s e-mobility ambitions. Building on this momentum, the European Commission launched the EBA in 2017, a public–private platform that now connects over 800 stakeholders across the battery value chain.

In 2018, the European Commission adopted the first Strategic Action Plan on Batteries to strengthen the entire value chain from R&D to recycling. To support large- scale investment, the EU approved two Important Projects of Common European Interest (“IPCEI”) for batteries. The first, launched in 2019, provided up to €3.2 billion in public funding from seven member states to support R&D and initial industrial deployment of innovative, sustainable battery technologies, aiming to attract around €5 billion in private investment. The second, approved in 2021, allocated €2.9 billion across twelve member states to accelerate raw material extraction, advanced cell design, and recycling projects, expected to leverage ~€9 billion in private capital.

More recently, the Green Deal Industrial Plan (2023) elevated batteries to one of 19 strategic net-zero technologies under the NZIA. The NZIA established a non- binding target of 550GWh of EU battery manufacturing capacity by 2030. To support this objective, it introduced key instruments such as priority permitting and the creation of ‘net-zero acceleration valleys’ to foster industrial clustering, attract investment in net-zero technology manufacturing projects, and streamline approval processes. Complementary frameworks include the CRMA, designed to strengthen supply chains, and the Batteries Regulation, which imposes EU-wide requirements on sustainability, recycling, carbon footprint disclosure, and due diligence. Supporting measures like the revised Industrial Emissions Directive and the Euro 7 Regulation extend these standards to production sites and battery durability.

On the funding side, EU financial support has come through programmes such as Horizon Europe, the European Regional Development Fund, and the Recovery and Resilience Facility. The European Court of Auditors estimates that between 2014 and 2020 alone, at least €1.7 billion in EU grants and loan guarantees were directed towards the battery sector. The European Investment Bank (“EIB”) has also emerged as a key financier, extending dedicated lending across the battery value chain.

These initiatives form the EU’s institutional core — strategic, regulatory, and financial measures to scale battery production, secure supply chains, and enhance global competitiveness.