July 17, 2025: Europe’s superficial love-hate relationship with Chinese battery tech and EV investors risks derailing the bloc’s sustainability, economic and security objectives, and potentially harm trade with the US, according to a new study.
Brussels-based thinktank Bruegel said in its analysis, released on July 16, the EU’s current crossroads in EV industrial policy is defined by a paradox.
The bloc must accelerate its green transition while managing rising strategic dependence on foreign — especially Chinese — technologies.
However, the EU lacks a united strategy across all member states to align it with climate, industrial and security aims, the study said.
Despite the EU’s imposition of provisional import tariffs on Chinese battery EVs amid concerns over unfair state subsidization, Chinese investment in Europe’s EV sector has moved from the periphery to the core of the continent’s green industrial transition, according to Bruegel.
In 2024, Chinese greenfield investment in the EV sector was around €5 billion ($6 billion) — more than 50% up from 2022, accounting for half of all completed Chinese greenfield foreign direct investment into Europe that year.
Plant-level investment data shows that China has become the second-largest investor in Europe’s EV supply chain.
These investments span nearly the entire value chain, from upstream cathode and anode materials to midstream battery cell and module production, and downstream into EV assembly and battery recycling.
However, while it makes sense to tap Chinese FDI to fill immediate gaps, the ultimate benchmark should be whether this investment complements domestic capacity building and diversification towards partners more aligned with EU norms, Bruegel said.
“But Europe’s reliance on Chinese firms for critical raw materials and battery components is a vulnerability. China control to a significant degree the refining and processing of lithium, nickel, cobalt and rare earths, which are essential inputs for EVs.”
Chinese moves to tighten export controls on rare earths and high-performance magnets in retaliation against US tariffs illustrate Beijing’s readiness to weaponize supply chains as a tool of geopolitical leverage, according to Bruegel.
“For Europe’s automotive sector, this means that abrupt restrictions or price shocks could disrupt production, hinder the scaling-up of production of affordable EVs and erode industrial resilience.”
China’s involvement in the European EV and battery supply chains could also complicate EU access to major export markets, especially the US.
In terms of security, as EVs are now software-defined products, electronics and technology FDI poses particular risks related to data security and unauthorized access to sensitive information.
“Although locally assembled vehicles must comply with EU technical standards, embedded hardware and proprietary software can remain opaque, creating enduring vulnerabilities that are difficult to monitor and mitigate,” the report warned.
The EU Battery Regulation, adopted in 2023, could be used to restrict market access, ensuring that batteries, and the EVs powered by them, can only be sold in the EU if they meet tough environmental standards.
“However, until core provisions are finalized and enforced, much of the regulation remains toothless and does not tackle economic security concerns,” Bruegel said.
Bruegel’s analysis follows a study published in February that warned Europe risks becoming an assembly plant for Asian battery giants — some of which are receiving millions of euros in subsidies for projects that may breach the bloc’s own environmental rules.
In May, Batteries International reported that the EU was set to give battery manufacturers an additional two years to prepare for the introduction of new ‘due diligence’ and transparency rules under the bloc’s Battery Regulation, approved in 2023.
