Europe's battery industry is facing internal and external challenges, but Hungary has been promoted to Europe's "battery leader"?

Recently, battery manufacturer Novonix announced that many battery manufacturers are shifting from Europe to the United States due to subsidies that are not as strong as those in the United States. Due to factors such as shortages of key raw materials, the European battery industry is facing internal and external challenges. The US's large-scale subsidies to attract component manufacturers are seriously delaying the EU's plan to build an independent battery supply chain. Novonix, a North American battery grade synthetic graphite supplier, recently issued a warning that the US Inflation Reduction Act provides massive subsidies and incentives for the new energy industry, attracting a large number of companies to move from Europe to North America, leading to the loss of new projects producing battery raw materials in Europe and severely hindering the process of building an independent new energy vehicle battery supply chain.

The progress is slow and the situation is not optimistic

Although the European Council has passed a position paper on the Net Zero Industry Act. The bill proposes that by 2030, at least 40% of net zero technology products such as batteries must be manufactured domestically in the European Union. In November 2023, the European Commission and the European Parliament reached an agreement on the Key Raw Materials Act. The proposal sets multiple goals, requiring at least 10% of key raw materials to come from within the European Union annually by 2030; At least 40% of key raw materials are processed in the European Union; At least 15% of raw materials need to be recycled, etc. The key raw materials required for batteries such as graphite are among the requirements. The purpose of these measures is to encourage the development of local battery companies and also to force foreign car companies to set up lithium battery factories in Europe.

Moreover, in December 2023, the European Union and the United Kingdom announced a three-year extension of the tax exemption policy for imported electric vehicles, leaving more growth time for the local battery industry. In December 2019 and January 2021, the European Union approved two "major projects of common interest in Europe" related to batteries, investing 3.2 billion euros and 2.9 billion euros respectively before 2031 and 2028 to promote domestic battery research and production.

Although numerous preferential policies have been introduced, the development of the battery industry in Europe is still not optimistic. According to a research report by the European Union for Transport and Environment, electric vehicle manufacturers in the EU and the UK currently only receive 16% of the lithium, cobalt, and nickel required for their 2030 target production. Europe has fallen several miles behind in the global competition for electric vehicle battery raw materials. According to trade data from the Eurostat, EU member states rely entirely on processed lithium imported from some third-party countries such as Chile, the United States, China, and Russia.

Due to insufficient supply of lithium materials, a group of star start-ups in the battery industry have encountered significant difficulties, resulting in delayed shipment plans and slow capacity ramp up, which has dealt a blow to industry confidence. In fact, the challenges faced by the EU lithium battery industry are not limited to this. European countries have very limited domestic reserves of cobalt, nickel, manganese, and graphite, and almost no control over overseas mining operations; In terms of the production of key battery components, European countries do not have advantages in various aspects such as production technology, labor skills, equipment manufacturers, and production costs; In terms of battery processing and assembly, the technology and cost of EU countries are also at a disadvantage.

It is understood that the US Inflation Reduction Act provides approximately $369 billion in funding to climate and new energy projects through tax incentives, government subsidies, loans, and other forms, covering clean energy inclusive, localization of renewable energy supply chains, and encouraging the purchase of new energy vehicles.

The United States snatches away the European battery industry

It is worth noting that the Inflation Reduction Act benefits more domestic businesses and producers operating in the United States, and this trade protection measure has attracted criticism from multiple countries. Japan, South Korea, Germany, and France have expressed protests, and German Chancellor Scholz has publicly stated that the United States is igniting a "tariff war".

In December 2023, the European Commission proposed to provide a subsidy of 3 billion euros to battery manufacturers, which will continue until the end of 2026. The subsidy mechanism aims to provide financial support to European battery manufacturers and enhance their competitive advantage, but the scale of the subsidy is clearly not comparable to that of the United States. As a result, most companies, including Novonix, have had to shift their production capacity from Europe to the United States. Novonix CEO Chris Burns bluntly stated, "We have been considering expanding into Europe, but financing has become the biggest challenge, and the EU and UK clearly cannot compare with the US."

It is reported that according to information released by Novonix, its focus will be on the North American region before 2030, including the completion of the construction of the Riverside factory in Tennessee, which is designed to have an annual production capacity of 20000 tons of graphite. A new factory will also be launched, with the goal of further expanding the graphite production capacity in North America to 150000 tons per year. The Financial Times pointed out that Novonix is expected to start developing plans to build factories in Europe by the end of 2030, but this will depend on the demand of car manufacturers and battery manufacturers.

Hungary Promotes to European "Battery Leader" with the Help of China

Recently, BYD announced that it will build a passenger car factory in Hungary. This is BYD's second overseas expansion after establishing production bases in countries such as the United States and Brazil. BYD has put this gesture very low, stating that this investment will help BYD further expand the European market, enhance brand influence, create more job opportunities for Hungary, meet the growing demand in the European market, and promote local economic development. But as the first Chinese car company to establish a factory in Europe, it is beyond doubt what kind of first mover advantage BYD, as the "first crab eater", can gain.

It is understood that BYD Hungary's passenger car factory is located in the city of Comarom in western Hungary, covering an area of approximately 200000 square meters. The new factory will produce multiple passenger car models under BYD, including pure electric vehicles and plug-in hybrid vehicles. The initial planned production capacity is 100000 vehicles per year, and it is expected to gradually expand production capacity in the future according to market demand. The Hungarian government warmly welcomes BYD's investment. The Minister of Industry and Trade of Hungary stated, "BYD is a globally competitive new energy vehicle manufacturer, and we are very pleased to attract such companies to invest in Hungary. This will help enhance Hungary's position in the global automotive industry chain and also create more employment opportunities for Hungary."

BYD Chairman and President Wang Chuanfu said, "The European market is one of the important markets for new energy vehicles worldwide, and we have full confidence in the European market. By building a passenger car factory in Hungary, we will be able to better meet the needs of European consumers and enhance BYD's competitiveness in the European market." In recent years, with the increasingly serious global climate change and environmental pollution issues, New energy vehicles have become a focus of development for governments and enterprises around the world. As an important global market for new energy vehicles, Europe's demand for new energy vehicles continues to grow. According to data from the International Energy Agency, the sales of new energy vehicles in Europe reached approximately 467000 units in 2019, a year-on-year increase of 44%. It is expected that by 2025, the sales of new energy vehicles in Europe will reach 13 million units.

Hungarian Minister of Foreign Affairs and Foreign Economic Affairs, Szyardo Peter, stated on January 4th that Hungary received a total foreign direct investment of over 13 billion euros in 2023, reaching a historic high. On the same day, Siyardo posted a video on social media stating that Hungary's record breaking foreign direct investment was achieved amidst the severe challenges facing the global economy. Hungary's total foreign direct investment received last year was twice that of 2022, and these investments can create approximately 19000 job opportunities.

Siyardo said that most of Hungary's foreign direct investment in 2023 comes from China. Chinese automaker BYD plans to build a new energy passenger vehicle production base in the southern Hungarian city of Seged, which will be the sixth such factory in the country. Siyardo stated that Hungary has successfully attracted a large amount of investment in the electric vehicle industry and is expected to have the world's second-largest power battery production capacity, which will help Hungary become a "European champion" and one of the global leaders in the field of green and environmentally friendly vehicles.