EU can produce twice as many electric cars as needed, says study
Slow drive
Investment in electric car production has slowed in Europe, partly because there is already the capacity to build twice as many EVs as there is demand for, according to a new report seen by Alice Hancock.
Context: Brussels is gearing up to present a series of proposals on December 10 aimed at bolstering the bloc’s flagging industry and reviewing its ambitious plan to phase out internal combustion engines by 2035.
The combustion engine ban in particular has become a political lightning rod and its review may yet be delayed amid deep divisions between member states and within the commission, according to people close to the talks.
Brussels-based think-tank Bruegel has run the numbers on clean tech investment in Europe. Its new Clean Investment Monitor published today finds that investment in electric vehicle plants grew rapidly up until the beginning of 2024, but has declined since.
Part of the reason for that is that existing factories are already producing 200 per cent of the total demand for EVs in the EU, with a total capacity to produce about 4.6mn EVs.
Germany is home to the highest capacity of all member states, helped by a €5.8bn Tesla facility opened in 2022.
Bruegel’s tracker, which monitors facility-level data to work out real-time investment in the EU, found that Spain and Hungary were attracting the most clean tech investment, despite Hungary’s naysaying on climate policy.
Both have brought in significant amounts of Chinese investment relative to other member states. The Chinese battery maker CATL, for example, is currently building a €7bn facility in Hungary and a €4bn plant in Spain developed through a joint venture with Stellantis.
Previously the majority of investment into battery supply chains in Europe came from South Korean companies such as LG Energy and Samsung.
“While industrial-policy debates in Europe tend to focus on how best to support manufacturing projects, the EV case illustrates the equally important need to strengthen demand-side measures,” said Simone Tagliapietra, senior fellow at Bruegel.
“This means better co-ordinated EV purchase-subsidy schemes across Europe and avoiding market confusion by watering down key provisions such as the 2035 combustion engine ban,” he added.
Tagliapietra also noted that “squeezed between Chinese competition and US tariffs, European carmakers are unlikely to be able to rely on exports for relief”.