The European automotive industry, a key economic pillar for the region, faces significant challenges from technological disruptions, international competition, geopolitical issues, and high costs. To future-proof the value chain, the ecosystem could be strengthened by developing a strong EU battery value chain. Europe produces less than 10 percent of global battery cell capacity and even less in upstream activities, leaving OEMs dependent on imports, Senior Partner Andreas Tschiesner and coauthors note. By 2030, battery demand for electric vehicles could reach 600–800 gigawatt-hours—three to four times today’s capacity—amid a mismatch between Europe’s focus on nickel manganese cobalt (NMC) technologies and market demand for lithium iron phosphate (LFP) batteries, largely reliant on China.
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A stacked bar chart illustrates the total production capacity along the battery value chain in 2024, by region, as a percentage. The chart is divided into 6 process steps: lithium mining, lithium refining, active material, anode, cell, and recycling. For each step, the production capacity is segmented by region, represented by different colors: Europe, US, China, and the rest of the world. In lithium mining, China accounts for 19%, the US has 1%, and the rest of the world dominates with 80%. In lithium refining, China’s share increases to 71%, with the US at 2% and the rest of the world at 27%. For active material production, China has 82%, Europe has 2%, the US has 1%, and the rest of the world has 15%. China’s dominance continues in anode production with 92%, with the rest of the world producing 8%. In cell production, China again leads with 80%, followed by Europe at 8%, the US at 7%, and the rest of the world at 5%. Finally, in recycling, China has a 96% share, with Europe at 1%, the US at 2%, and the rest of the world at 1%.
Note: This image description was completed with the assistance of Writer, a gen AI tool.
Source: McKinsey Battery Insights, McKinsey MineSpans.
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To read the article, see “A new ‘ERA’: An action plan for the European automotive industry,” September 8, 2025.