Europe Lays Plans to Extract China’s Battery Know-How

There’s a little bit of “What goes around comes around” behind Europe’s latest industrial policy initiative.

The Financial Times reported on Tuesday that the European Union is drawing up a plan to make Chinese companies fork over intellectual property in exchange for EU subsidies, citing two anonymous senior EU officials. The plans will initially apply to Chinese companies that want to build battery factories in the EU, and are a carrot to the stick that is tariffs, which are looming ever-greater over China’s manufacturing industry with the imminent re-ascension of President Donald Trump in the US. They also mimic a policy Beijing has used to great effect to buoy economic development. 

Flat Battery

While Trump is planning to up the ante on China tariffs, there is already a European appetite for imposing levies on Chinese goods related to the green energy transition, like electric vehicles. Despite this, China has poured billions in foreign direct investment into EU nation Hungary to develop EV battery plants. Per the FT, the EU is going to solicit bids totalling €1 billion ($1.1 billion) for battery development next month, and it’s baking in provisions that companies must first have factories inside the EU and second, must share technical knowledge with the EU.

This mirrors China’s own domestic policy toward foreign firms, which has greatly benefitted a host of homegrown industries ranging from aviation to solar panels. And it comes at a time when Europe is struggling with battery development itself:

• Sweden-based Northvolt, the poster-child for EU battery firms, is perilously close to going bankrupt and is struggling to hit production targets, according to a recent Reuters report.
• Some European battery companies are already looking for strategic alliances with Chinese firms. “It’s really important for us to move fast in the battery space, and in doing that, you can’t avoid working closely with China the way things are right now,” Arne Fredrik Lånke, CEO of Norwegian battery-maker Elinor Batteries, told tech publication Sifted.

State of the Union: The EU will have a geopolitical tightrope to walk if and when the incoming US president re-ignites his trade war with China, and officials are already bracing themselves for the possibility of Trump tariffs on their own wares, Politico reported last week. Everett Eissenstat, who was an international economics official in the first Trump administration, told Politico he believes Trump is likely to focus his attention on pressuring individual member states to redress what he views as trade imbalances. “I think there’ll be less support for talking to the EU as the EU,” Eissenstat said.