Battery relocation raises costs

Brussels is considering moving battery production from Asia to Europe to reduce dependence on foreign suppliers, but this shift could increase the cost of electric vehicles by about 2,100 euros per unit, according to the Bruegel research center.

Cost difference between regions

Battery cells produced in Asia currently cost around 50 euros per kWh, while European-manufactured cells cost about 85 euros, creating a 35 euro difference per kWh. For a standard 60 kWh battery, this adds up to 2,100 euros in extra costs.

European competitiveness challenge

The European Commission describes this cost gap as a "competitiveness handicap," noting that in 2023, European battery production costs were nearly 50% higher than those of China, despite using the same battery chemistry.

New legislation aims to boost local production

The Industrial Accelerator Act, proposed by the Commission in March 2026, is a legislative proposal that could influence public aid and procurement policies. It encourages European production of electric vehicles and their components, with specific requirements for battery components.

Strategic push for local supply chains

The goal is to reduce Europe's reliance on Asian battery production, which is concentrated in a few countries. A local supply chain would help insulate the region from global price fluctuations and supply chain disruptions while creating jobs and retaining economic value within the EU.

Challenges of transitioning to local production

However, building local production capacity requires significant investment, time, and resources. In the short term, higher costs could make electric vehicles less attractive compared to cheaper models from Chinese manufacturers, which may undermine the goal of promoting electric vehicles.

Financial support for European battery makers

To help European battery manufacturers, the Commission launched the "Battery Booster Facility" in June 2026, offering up to 1.5 billion euros in interest-free loans. This initiative aims to support companies during the expensive startup phase and help them achieve economies of scale.

Uncertain future of cost reduction

The timeline for closing the cost gap between European and Asian battery production remains unclear. Until then, the increased costs could be borne by car manufacturers, taxpayers, or consumers, but no clear answer has yet emerged.