Europe must establish a viable business case for domestic battery manufacturing immediately — or risk an exodus of capital and expertise to other countries in as little as three years, new analysis has warned.

European clean transport campaign group, Transport & Environment (T&E), warned in a paper published on September 15 the bloc faces both an innovation and a scaling problem in batteries.

T&E said the current policy toolbox is too slow and too small to move the needle and a ‘battery booster’ strategy adopted in 2025 provides the right diagnosis, but remedies fall short.

Meanwhile. “weak ‘made-in-EU’ rules allow dominant global players to exploit loopholes” — using third-country subsidies or jurisdictions to bypass EU market standards and access public funds without creating local value.

The next three years are critical, T&E said. “Without a viable business case for domestic battery manufacturing now, capital, talent, research and innovation centres and factories will permanently relocate to countries such as the US and China or be rerouted to others to circumvent EU foreign direct investment rules.”

Continued dependence on dominant single-source countries for critical raw materials and components leaves European industrial, automotive, energy and defence sectors highly exposed to geopolitically motivated export bans and supply disruptions.

Without swift action, Europe’s battery industry may still lack the technological maturity and scale-up capacity needed to protect critical parts of the value chain from external disruptions, T&E said.

“There is a high possibility that Chinese batteries will become more expensive once the prospects of a European battery value chain have been blown up and/or that China stop selling best-in-class batteries once China’s long-term dominance is asserted.”

Key recommendations from T&E include:

• Tying financial and other support for projects to verified production;
• Public money should shift risk rather than subsidise price;
• AI and digitalisation must be rapidly deployed across battery discovery, development and production;
• Europe must also speed-up high-purity, cost-efficient recycling routes, particularly for low-value chemistries.

“As Europe’s battery sector faces severe headwinds, immediate action is critical to secure this strategic value chain before the window of opportunity closes for good.”

T&E’s warning is the latest in a string of criticism of the EU’s approach to nurturing and expanding am industrial battery base.

Earlier this month, the European Court of Auditors said EU plans to supercharge the clean energy transition and wean the bloc off Russian gas and oil had stalled — and not enough investments were being made in vital projects.

The court had previously slammed EU chiefs over supplies of metals and minerals critical to battery manufacturing and other sectors, saying moves to diversify supply chains had yet to show tangible results.