Europe’s battery sector is at a critical inflection point. The region accounts for 25% of global battery demand but just 10% of production capacity, leaving it dependent on imports and exposed to geopolitical and supply chain risks.

China alone controls over 75% of global lithium-ion (“Li-ion”) manufacturing, more than two-thirds of processing for key battery metals, and 93% of anode production capacity. At the same time, the United States (“US”) has supercharged domestic investment via the Inflation Reduction Act (“IRA”), further intensifying global competition.

This reality underscores why Europe must urgently scale its own battery manufacturing base—not only to meet rising electric vehicle (“EV”) demand, but also to safeguard industrial sovereignty and reduce reliance on external supply chains

Despite setbacks—including delays, cancellations, and ownership changes at projects such as PowerCo, Automotive Cells Company (“ACC”) and Northvolt—Europe continues to expand its gigafactory footprint. The region currently has just over 300GWh of operational capacity, with an additional 500GWh under construction.

To meet the European Union’s (“EU”) Net Zero Industry Act (“NZIA”) target of 40% domestic production, Europe needs another 200GWh annually by 2030, and to meet the European Battery Alliance’s (“EBA”) target of 550GWh, the shortfall rises to around 250GWh per year.

These targets are attainable given the scale of Europe’s project pipeline. However, much of this capacity rests on projects led by Asian players, European startups, or joint ventures between the two. The future of these projects looks hopeful, but their realisation will depend on whether they receive final investment approval and stay on schedule.

To help bridge the gap between ambition and implementation, Europe is working to enhance its policy frameworks and strengthen the case for investment. The EU’s Critical Raw Materials Act (“CRMA”) sets targets to strengthen supply chains by aiming to source 10% of critical raw materials domestically, process 40% within the EU, and recover 15% through recycling. Complementary initiatives like the €1.8 billion Battery Booster and the broader €3.8 billion Industrial Action Plan (“Action Plan”) are intended to help improve competitiveness, particularly relative to Asian markets.

National governments are also stepping in, with France, Spain and the United Kingdom (“UK”) each deploying multi-million-euro support packages to attract and retain large-scale cell manufacturing. A strong rebound in EV sales in 2025—up 27% year-on-year in the first five months, reaching 1.6 million units—is reinforcing long-term demand fundamentals. This recovery, coupled with Europe’s industrial expertise, renewable energy base, and strong automotive sector, provides a solid foundation for scaling.

However, the competitive landscape in battery chemistry is evolving. While Europe’s projects remain tied to nickel manganese cobalt (“NMC”), Chinese players are aggressively building lithium iron phosphate (“LFP”) plants in Europe, leveraging a 20–30% cost advantage and threatening the competitiveness of EU-based gigafactories.

For investors, the message is clear: the market is challenging but still full of opportunity. Europe is not retreating—it is recalibrating. Gigafactory clusters in France’s “Battery Valley,” Germany, Spain, Poland, and Hungary demonstrate strong momentum. Europe’s gigafactory expansion is challenging but increasingly essential. The next five years will be critical, as success will depend on projects that align with policy goals, secure reliable offtake agreements, and scale effectively.

For investors with long-term capital and an interest in industrial collaboration, Europe’s battery sector offers not only a strategic opportunity to support regional resilience but also a promising avenue for growth.