According to a new study by Transport & Environment (T&E), EV battery cells produced in the EU currently cost about $41-$43 per kilowatt-hour more than those made in China. For a typical 60 kWh family EV, that implies a gross cell cost disadvantage of roughly €2,000-€2,500 per vehicle.

Yet the same T&E report delivers a more nuanced message. The gap, it argues, is not rooted in inferior European technology or structural inefficiency.

Rather, it reflects differences in scale, manufacturing experience, automation levels, and supply-chain maturity and is therefore potentially reversible, especially if the EU’s proposed ‘Made in Europe’ rules succeed in anchoring investment and upstream processing within the bloc.

Cells account for roughly 60-70% of a battery pack’s cost, and raw materials alone make up about two-thirds of cell costs. China’s advantage stems not only from vast manufacturing scale and high automation, but also from its dominance in refining lithium, nickel, cobalt, and graphite into battery-grade chemicals.

European gigafactories are newer, often operate below optimal capacity, face higher labor costs and industrial electricity prices, and experience elevated scrap rates during ramp-up (failed cells in production), and have less vertically integrated supply chains. These factors inflate costs relative to China’s mature and highly optimized ecosystem.

This is where the EU’s proposed industrial policy changes become central. Under the forthcoming Industrial Accelerator Act and related ‘Made in Europe’ provisions, access to public funding, tax incentives, and potentially EV purchase subsidies would be linked to clear European content thresholds.

Crucially, these rules are expected to extend beyond final cell assembly to cover strategic upstream components such as cathodes, anodes, and precursor materials.

The intention is to ensure that public money supports the development of a complete battery value chain within Europe, not merely packaging imported inputs.

A key part of this strategy involves diversifying raw material sourcing away from China. Securing supplies from third countries means battery manufacturers and their suppliers would sign long-term contracts, take equity stakes, or invest in refining capacity in resource-rich nations.

Such as Chile, Argentina, or Australia for lithium, Indonesia for nickel, and the Democratic Republic of Congo for cobalt. Because mining alone is insufficient, the strategy also requires building or financing refining facilities.

Ideally, within Europe or in partner countries that meet EU sustainability standards, so that materials qualify under local-content rules.

New battery technologies

Although T&E’s analysis focuses on existing lithium-ion technologies, such as NMC and LFP, the broader technological landscape is evolving as well.

Sodium-ion batteries, which avoid lithium, nickel, and cobalt altogether, could reduce exposure to these materials in entry-level vehicles if they scale successfully.

Solid-state batteries promise higher energy density and improved safety in the longer term, potentially reshaping premium segments in the 2030s.

However, these alternatives do not automatically solve Europe’s competitiveness challenge. China is investing heavily in both sodium-ion and next-generation lithium technologies, and the fundamental drivers of cost — scale, automation, supply-chain integration, and energy pricing — would still determine who leads.

Cost gap reduced to $14 per kilowatt-hour

According to T&E’s modelling, if the EU’s policy measures successfully drive scale and vertical integration, European battery manufacturing costs could fall by nearly one-third by 2030.

The cost gap with China would narrow to roughly $14 per kilowatt-hour, cutting the implied disadvantage for a 60 kWh EV to well under €1,000 — potentially in the €300-€750 range depending on sourcing and integration.

At that level, the remaining difference becomes a manageable ‘sovereignty premium’ rather than a structural threat to competitiveness.

The broader competitive landscape remains complex. Chinese battery manufacturers are already investing heavily in Europe, building or operating plants in Germany, Hungary, and Portugal.

If EU rules tighten, these firms are unlikely to withdraw; instead, they may localize more production and adapt their supply chains to comply with content thresholds. The real contest will therefore extend beyond geography to control over technology, upstream processing, and long-term resource contracts.

T&E’s central message is that Europe’s battery disadvantage is not destiny. Today’s roughly €2,000-plus per-vehicle gap reflects industrial infancy, not technological inferiority.

With coordinated industrial policy, upstream diversification, and sustained investment, that gap can shrink substantially by the end of the decade.

Whether Europe converts that window into lasting competitiveness will depend on how decisively it implements its new ‘Made in Europe’ framework and how effectively it balances openness with strategic resilience in an industry that underpins the continent’s clean mobility ambitions.