EU Battery Sourcing Deal Risks European EV Supply Chain
A Franco-German agreement weakens EU battery sourcing rules, allowing Chinese batteries in EU-assembled cars to be labeled 'Made-in-EU' and reducing required European content, threatening the continent's battery manufacturing capacity and affordable EV supply.
A new Franco-German deal softens European Union battery sourcing rules, threatening the continent's electric vehicle supply chain. The agreement, struck on the sidelines of an EU leaders' gathering in Brussels, allows cars assembled in the EU with Chinese batteries to be labeled as Made-in-EU. It requires sourcing only 10% of battery cells from Europe in 2028 and 2029, rising to 20% in 2030 and 2031. This ambition is set well below the status quo, as over 50% of battery cells used in EU electric vehicles were produced in Europe in 2025.
The deal links the EU's 2035 emissions rules to a European preference in public contracts and financial schemes. It requires carmakers to cut fleet-average CO2 emissions by 90% by 2035 without offsetting the remaining 10%. For car components excluding batteries, 70% must be produced in Europe. The original EU proposal required a 100% CO2 reduction by 2035, effectively ending new petrol and diesel car sales, but the Commission proposed revising this in December 2025 to replace the 100% target with a 90% target. Germany, home to Volkswagen, BMW and Mercedes-Benz, has advocated for technological flexibility for combustion-engine and hybrid models after 2035, while France has pushed for strict 'Made in Europe' requirements in public procurement to counter Chinese competition.
European battery capacity at risk
Significant European battery manufacturing capacity is now at risk due to the reduced sourcing requirements and weakened strategic component rules. Transport & Environment warns that delaying and weakening requirements for Made-in-EU batteries and strategic components like cathodes will have catastrophic consequences on the European battery supply chain. The group states that 164 GWh of European battery manufacturing capacity is at risk in 2027. By 2030, the amount of capacity at risk rises to 254 GWh.
Industry warns of supply chain collapse
Transport & Environment warns the agreement jeopardizes the entire European battery supply chain and may bury Europe's auto industry. The group describes the deal as a historic mistake. Anna Krajinska, senior director at T&E, states that the agreement may bury Europe’s auto industry and slow the shift to electric vehicles. The group calls on the European Parliament and EU governments to reject further weakening of car CO₂ standards and support effective Made-in-Europe measures.
Supply cuts threaten affordable EVs
The proposed deal would curb the projected supply of electric vehicles in the EU from 57% to 43% by 2030. This reduction will slash the availability of cheap electric vehicle models entering the market. This comes at a time when fuel prices are at record highs and electric cars are repeatedly breaking sales records. The agreement allows non-EU countries with EU ties, including Norway, Iceland, Switzerland, and the UK, to participate in the European preference scheme.
The European Parliament is due to vote on the Commission's proposal in Strasbourg on 23 November. Germany's environment minister has proposed a 95% emissions reduction target, indicating potential domestic resistance. The European Parliament and EU governments will need to agree on how far to relax the 2035 zero-emissions target.
