23008_Nearshoring Report

The production of EV batteries within Europe’s borders doesn’t stop at the finished battery cells: there is also the opportunity to reduce reliance on Far Eastern sources (particularly China) of the primary materials for the manufacture of EV batteries. Localising/regionalising production of the active components within battery cells (particularly the cathode active materials including cobalt and nickel, as well as refining and processing battery metals including lithium) will mean less requirement to transport these essential components over longer distances and potential face constraints on supply for a number of reasons. Also, further supply of essential components may be enhanced through greater recycling capacity and the growth of the circular economy: if redundant batteries and electronics can be broken down for reclamation of reusable elements closer to where they are needed, European manufacturers will potentially face less volatility in supply and in spot pricing.

Government support to attract businesses to invest in Europe will be an important factor especially as other countries are creating strong incentives to located there instead. In August 2022, the US enacted its Inflation Reduction Act (IRA) which includes subsidies and incentives totalling USD 369 billion for companies to pursue green innovation and technology development. In order to maintain relative attractiveness, the EU unveiled its Green Deal Industrial Plan in response to the IRA, effectively relaxing state aid rules to help EU countries compete as manufacturing locations for green investment. The UK is currently considering its position and businesses and industry groups are strongly urging the government to create a similar programme of incentives: a recent poll by the Institute of Directors found that 78.9% of businesses agreed that the UK Government should subsidise green industries and innovations that take place within the UK.


In March 2022, Volvo Cars and its electric vehicle battery partner Northvolt announced they would be investing over SEK 30 billion in a new EV battery manufacturing plant in Gothenburg, Sweden to be operational in 2025. The new plant will support Volvo’s electrification strategy – to only offer battery powered vehicles by 2030 – by producing battery cells specifically developed for use in next-generation Volvo and Polestar electric vehicles. The plant will have an annual cell production capacity of up to 50 gigawatt hours (GWh), equivalent to supply roughly half a million cars per year. Northvolt also plans to create recycling capabilities so that about 50% of all raw materials for battery production will be sourced from recycled EV batteries by 2030. The new plant will be located in close proximity to Volvo Car’s largest automotive factory in Sweden and to both Volvo Cars’ and Northvolt’s R&D centres, as well as near to Sweden’s primary nickel, cobalt, lithium and graphite deposits, which are the raw materials needed for battery production. This relationship between Volvo and Northvolt also establishes vertical integration of battery development and production with automotive manufacturing which is important since the battery represents the largest individual cost component in an electric car, as well as a major part of the automaker’s carbon footprint.


South Korean company LG Energy Solution established Europe’s first and largest production centre for lithium-ion batteries for electric cars in 2016 in Biskupice Podgórne, near Wrocław in Southern Poland. The site covers 100 hectares, employs 10,000 people and the batteries produced are used in electric cars made by brands such as Audi, BMW, Fiat, Ford, Porsche and Volkswagen. In 2022, it announced that it would again be expanding the factory to make it the largest in the world and taking its production capacity from 70 GWh in 2022 to 115GWh in 2025. Along with its own investment of EUR 1 billion in the expansion, the European Commission approved the Polish Government’s grant of EUR 95 million in state aid to secure the investment in Poland.



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