Europe's €200bn EV Supply Chain Procurement Challenge

Strategic sourcing decisions across battery manufacturing, charging infrastructure and vehicle production could reshape the region's automotive procurement landscape as European Economic Area nations and Switzerland commit almost €200bn to electric vehicle ecosystems.

Government and private sector buyers face complex procurement choices across a supply chain where Chinese companies manufacture nearly 70% of global EV batteries and supply battery cells for more than 80% of EVs worldwide, according to the International Energy Agency (IEA). The capital commitments include €109bn in battery supply chain procurement, up to €46bn in public charging network roll-out and €60bn in manufacturing, according to research group New Automotive.

European procurement teams must now navigate sourcing decisions between established Asian suppliers and emerging domestic manufacturers. Led by dominant manufacturers like CATL and BYD, China also controls a significant majority of the refining capacity for essential battery materials like lithium.

New Automotive says Europe now produces batteries for roughly one in three EVs sold domestically. Announced capacity could meet future demand if fully utilised.

Battery supply chain sourcing

Batteries represent the largest capital commitment in the research, covering mining, refining, materials, gigafactories and recycling procurement. New Automotive's report says announced capacity could meet future demand if fully utilised.

Europe has strengths in cell manufacturing and downstream integration. Gaps exist in cathodes, precursors and parts of the mid-stream value chain.

Battery investments remain capital-intensive and subject to intensive international competition. This gives them the highest sensitivity to delays, downsizing or cancellation, the report reads.

Asian battery giants like CATL and LG Energy Solution are already set up in the region. European-owned businesses like Volkswagen's PowerCo are beginning to design, develop and produce cells entirely within the continent.

"We are the first European carmaker to establish our own battery cell development and production," says Oliver Blume, Chief Executive Officer of Volkswagen Group.

"This step strengthens our position and independence in the global competition."

Volkswagen's PowerCo aims to build production capacity of up to 20 GWh. Germany manufactures half of all EVs made in Europe, according to the German Automotive Association.

Regional procurement investment patterns

Germany accounted for almost a quarter of the region's investment, according to New Automotive's research. France made up 18%. Spain and Portugal together are responsible for 12%.

Nordic countries dominate Europe's EV adoption, with Norway leading the world in percentage of EV sales, according to the European Environment Agency. Denmark, Sweden and Finland also lead the market.

Norway accounts for 1.6% of the total investment. Sweden accounts for 3.8%, Finland for 3.6% and Denmark for just 0.8%.

In December, the European Commission launched a plan to cut back its effective ban on ICE cars from 2035. The revised approach opts for 90% of new cars sold from that date to be zero-emission.

Manufacturing and co-location strategies

Manufacturing of EVs in Europe is centred on converting legacy automotive plants alongside selective new EV-only facilities, the report says. Battery production is increasingly being co-located to reduce costs and manage supply risk.

This is primarily happening in established automotive regions like Germany and Spain. Both European OEMs and international manufacturers are carrying out the work.

Tesla operates a €5.8bn Gigafactory in Grünheide, Germany with an annual capacity of 375,000 EVs. Stellantis has confirmed its plans to manufacture the Opel C-SUV BEV with Chinese carmaker Leapmotor at a plant in Spain, "leveraging the Chinese New Energy Vehicle ecosystem".

On its website, Tesla claims the German factory is "its most advanced, sustainable and efficient facility yet". The co-location strategy could show procurement teams prioritising supply chain resilience over traditional lowest-cost sourcing models.

Charging infrastructure procurement landscape

Europe has established a globally leading position in manufacturing high-power charging infrastructure, according to New Automotive's report. More than €3.5bn is being invested across the continent in this manufacturing.

Companies across Italy, Germany and the Nordics are supplying ultra-fast systems. Public roll-out of charging infrastructure is estimated to have commitments of between €23bn and €46bn.

More than a million public charge points have been deployed across the region. ABB E-mobility is a global leader in EV charging infrastructure with more than a million chargers deployed.

China is by far the world's largest EV market, with 11.3m EV sales in 2024 according to the IEA. This made up 48% of its total vehicle sales.

According to the Center for Strategic and International Studies, the country invested at least US$230bn in the research and development of EVs between 2009 and 2023. This funding covers a range of government support, including exemption from 10% sales tax, funding for infrastructure, R&D programmes for manufacturers and government procurement of EVs.

The country has also made regulatory changes such as the "dual-credit system" that push automakers to grow electrification and make EVs easier for consumers to obtain. These procurement incentives could mean European buyers face competition from heavily subsidised Chinese suppliers across the supply chain.