Europe could be heading into an “acute” battery manufacturing surplus in the mid- to late-2020s, potentially risking €27 billion ($32.8 billion) worth of investments, according to Transport & Environment.

The environmental campaign group said in a new study that the “unambitious” CO2 targets in Europe could slow down production and sales of electric vehicles. This, in turn, could jeopardise Europe’s chance of becoming the global leader in one of the century’s key technology, it adds.

The groups estimates that Europe (including the UK) is set to have enough batteries to power over 90% of all new vehicle sales by 2030, with 38 planned and announced gigafactories in the region. These account for 1,000 gigawatt-hour of production capacity and almost €40 billion of investments, Kallanish learns.

“The battery industry is successfully responding to Europe’s e-mobility ambitions, yet EU policy-makers are failing to provide regulatory certainty and guarantee an adequate market for electric vehicles,” says Julia Poliscanova, senior director for vehicles and e-mobility at T&E. “The EU and UK must raise CO2 standards throughout the decade to avoid wasting billions of investments and derailing the battery boom.”

According to the study, planned battery production could be almost three times higher than the minimum demand in 2025-2030, with a surplus peak of 227 GWh in 2026. Current regulations, battery demand is projected at 174 GWh in 2025, rising to 485 GWh in 2030, when a more ambitious CO2 standard enters into force. The forecast is far below the anticipated 462 GWh of battery capacity by 2025, growing to 1,144 GWh by 2030, T&E argues.

Poliscanova calls the EU and the UK to increase the 2025 CO2 reduction target to 25% and set an additional target of -40% for 2027. ICE cars and vans should also be phased out by 2035, believes the group.

The study claims 17 of the 38 proposed gigafactories have secured full funding, worth €25.5 billion. A further 10 projects have partially financing in place, including Britishvolt, Italvolt, Freyr and Basquevolt-Nabatt. The remaining 11 projects analysed, including some of Volkswagen’s gigafactories, have been announced but further information is currently unavailable.

“Battery manufacturing is the most valuable part of the EV supply chain and with China and the US also pumping huge amounts of cash into battery making, Europe’s wasted investments this decade will be nothing compared to the opportunity missed this century,” warns Poliscanova.