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Battery manufacturers from China are expanding rapidly in Europe, responding to the growing market for electric vehicles while slowing the overall contraction in Chinese investment on the continent.
Mostly shunned from North America by the US Inflation Reduction Act, which seeks to reduce American companies’ dependence on Chinese supply chains, Chinese battery makers are instead focusing on Europe, the world’s second-largest electric vehicle market. They have become the main source of Chinese investment in the region, according to a study released early Tuesday local time by the Mercator Institute for China Studies, a think tank, and the Rhodium Group, a research institute.
China leads the world in the production of electric vehicles, including batteries used to power cars. In contrast, Europe has few large companies that make batteries, so it is open to Chinese investment as automakers remain competitive in the global market. China’s largest EV battery manufacturer is meeting this demand, building or expanding several factories in the UK, France, Germany and Hungary,
Since 2018, Chinese battery companies have announced investments in Europe worth $17.5 billion, including plans by Contemporary Amperex Technology Company Limited, or CATL, to build a factory in Hungary that will be the largest in Europe. But the Chinese are also looking to move beyond batteries, to build cars in Europe, to meet growing demand for EVs ahead of the European Union’s ban on carbon dioxide-emitting cars in 2035.
“China’s strength in green technology is in line with Europe’s green agenda,” the report said.
The surge in battery factories comes as overall Chinese investment in Europe drops to 7.9 billion euros, or $8.7 billion, in 2022, down 22 percent from 2021 and the lowest point in a decade, the study found. Although China’s “zero Covid” restrictions have played a role, increased wariness among European lawmakers towards Chinese investors has also led to a decline in acquisitions. Higher scrutiny of transactions involving goods that could be used in the military or private sector, such as semiconductors, also played a role.
European governments are also wary of Chinese companies gain access to critical infrastructure. This year, Germany’s economy ministry was forced to re-examine whether Cosco, a Chinese state-owned shipping company, could acquire a stake of up to 25 percent in a terminal in the port of Hamburg. Chancellor Olaf Scholz had approved the sale last year.
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