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External experts commissioned by T&E find no EU-wide or national requirements on technology transfer and breaches of air pollution rules from battery factories in Poland and Hungary. T&E calls on clear foreign investment rules and a comprehensive European strategy for battery supply chains.

Despite receiving €900 million in state aid subsidies from the Hungarian and Polish governments, no environmental or social conditions were attached by the European Commission to the CATL battery plant in Hungary and the LG Energy Solution one in Poland, a new study on behalf of T&E reveals. In two other EU-Chinese partnerships, the VW-Gotion in Germany and the CATL-Stellantis in Spain, Carbone 4 and other independent experts find there is no long-term skill transfer and the collaboration is entirely focused on securing short-term battery demand.

For the Hungarian and Polish projects, money is often drawn from the European post-covid recovery fund. But both facilities have breached the EU’s Industrial Emissions Directive on air pollution, as they exceeded the levels for NMP, a toxic substance used in cathode manufacturing. In Hungary, further concerns around insufficient water management plants and energy supply are also revealed. These environmental breaches in these two plants add up to the poor working conditions largely reported in the Hungarian battery industry.

For the plants in Germany and Spain, the investigation focused on technology transfer. In the case of Gotion, where Volkswagen invested €1.1 billion and holds 26.47% of shares, the group is found to have had a less significant say in battery operations and the partnership is often described simply as a means of securing iron-based (LFP) battery supplies. In Spain, where the joint venture between Stellantis and battery giant CATL to manufacture LFP batteries benefited from almost €300 mn in state aid, experts confirm that there is no long-term technology transfer involved. Expert after expert interviewed pointed out that a lack of any comprehensive EU or national rules on technology transfer or local content in the EU, as opposed to China or the US, is at the root of the problem.

Julia Poliscanova, Senior Director for Vehicles & Emobility at T&E, says: “Asian-EU partnerships were presented as knowledge-sharing vehicles, but they are not turning into local gains. And sometimes they do not even meet environmental rules or EU labour standards. Member states must ensure environmental and work conditions are respected while the European Commission uses all its legal tools in the areas of state aid, trade, procurement and foreign investment to require intellectual property transfer. With over 650 GWh of battery capacity coming from South Korean and Chinese players, no race to the bottom across the block should be allowed. Clear rules on foreign direct investment to ensure comprehensive technology and skills transfer are equally needed”.

With over 90% of all electric car and storage batteries in the EU currently produced by Asian manufacturers and 40% of the announced gigafactories being either Chinese or South-Korean, Europe risks becoming an assembly plant in a context of serious geopolitical, economic and security challenges. But it can leverage its internal market power. T&E calls for a comprehensive strategy for battery supply chains to be presented on March, the 5th, as part of the EU action plan for the automotive sector.

Julia Poliscanova adds: “The upcoming strategy to help the European automotive industry remain competitive should address the battery challenge as a whole. This includes launching an investigation into unfair battery subsidies in China, setting resilience criteria for the granting of state aid and establishing binding grid-based carbon footprint rules for batteries to access the EU market”.

News release from T&E.

Read the full report.

Read the background study.