Is there a competition between Europe and the US for subsidies in the geopolitical struggle over batteries?

• Daniel Heeringa

  editor

Batteries are crucial for a clean future. But where will those batteries for electric cars, for example, be made: in China, the US or in Europe? The European Commission launched plans last week to secure battery production for Europe. But will they have an effect?

“This building has just opened and is already too small.” Eleo co-founder Jeroen Bleker points to a building site next to his brand new battery factory in Helmond. “So we’re in the process of expanding so we can start scaling here.”

Seven years later, what started as a student project at Eindhoven University of Technology has grown into a company with seventy employees. “We had developed an electric motorcycle,” says Bleker. “Then we thought: now let’s focus on electrification and on the most crucial component, the battery.” Eleo now makes battery systems for electric construction machines.

The company is still relatively small, but the ambitions are great. Because those who make batteries have the future, says professor of automotive engineering Maarten Steinbuch of Eindhoven University of Technology. “The battery is the single most important part of a car these days.”

But it goes much further, says Steinbuch. “If we have a lot of sun during the day, we can collect energy in batteries and use it at night for heat pumps and heating. Batteries are therefore an essential part of the entire energy transition.”

Crucial for batteries is the metal lithium. But Europe has almost no mines anymore. If we do not want to remain dependent on other countries, we need to catch up:

For batteries, Europe is still very dependent on China. China produces by far the most electric cars. And that applies even more to their batteries. Steinbuch: “We all know about the dependence on Russian gas and oil. The same thing could happen with batteries, if we don’t have our own battery factories. The battery will be the most essential part of future society in terms of energy.”

And so the battery is now part of a geopolitical battle. With billions in subsidies and tax breaks, US President Joe Biden wants to be with Inflation Reduction Act to lure producers of sustainable technologies to America.

This has consequences for Europe. So-called giga battery factories are currently being planned everywhere for the production of batteries for electric cars. Germany has the most ambitious plans, where Tesla, among others, wanted to build a battery factory.

But last month, Tesla decided to put the plans on hold because of US billions in subsidies for green investments. And Volkswagen is now also opting for a battery factory outside Europe: Europe’s largest automaker will produce batteries in Canada.

From one analyse from the Brussels environmental organization Transport & Environment shows that more than two thirds of the planned battery production capacity in Europe is at risk of delay or cancellation if nothing happens.

“There is a lot of pressure on the European Commission to increase production capacity for clean technology and batteries,” says trade expert David Kleimann of the Brussels think tank Bruegel. “That is the result of the heavy subsidies on clean technology in the United States and China.”

Is Europe in danger of losing the battery battle? The European Commission counterattacked last week with two laws: the Critical Raw Material Act, which should ensure that the EU becomes less dependent on scarce raw materials such as lithium and cobalt, and the Net Zero Industry Actwhich should ensure that Europe does not miss the boat when it comes to the development and production of clean technologies such as solar cells, wind turbines and therefore also batteries.

The European Commission wants to produce at least 40 percent of sustainable technologies in Europe by 2030. When it comes to batteries, the ambition is for Europe to produce 90 percent by 2030. To prevent companies from leaving for America, for example, state aid rules are being relaxed.

But critics fear that this will mainly lead to a subsidy race between Europe and the US. Kleimann: “This is really the worst case scenario in which companies try to increase subsidy amounts.

The trade expert warns against the waste of taxpayers’ money. He believes that governments should not be held hostage by companies such as Tesla and Volkswagen. “Investment decisions depend on much more than just the money on the table. And it’s not that easy for these companies to reinvest or build factories elsewhere.”

Eleo, supported by a large Japanese shareholder, is now also looking beyond the municipal boundaries of Helmond. Co-founder Bleker’s ambition is to one day build gigafactories for batteries. “Our big factories have to be all over the world. And a lot of them in Europe.”

And what if America’s big bag of subsidy money keeps ringing? “The American market is also very interesting for us. We prefer to keep production close to demand, so it is also relevant to look at America.”