Europe’s battery supply chain shifts to ‘marathon’ phase

Europe’s battery supply chain is at a strategic inflection point. While demand growth for EVs has been slower than earlier projections, industry leaders at PowerCo and CATL argue that Europe must rapidly build local capabilities, streamline logistics and pursue cost-competitive production to secure a resilient battery ecosystem.

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At ALSC Europe 2026, Matthias Braun, senior vice-president of logistics at PowerCo, and Aleksej Kruekov, general manager of overseas service for EMEA at CATL, say that a transition to electrification will be a long-term industrial transformation, rather than the sprint that the market previously thought. This shift is forcing companies across the battery value chain to reassess investment timelines, production strategies, and automotive logistics networks.

EV adoption is progressing more slowly and unevenly than expected, with OEMs adjusting through a renewed focus on hybrids and a more selective approach in battery investment. For Europe, the supply chain must gain resilience through building local know-how, infrastructure and partners to reduce dependence on Asia and withstand political and environmental disruption. “It’s not a 100m sprint, it’s really a marathon,” says PowerCo’s Braun.

Overcapacity and cost pressure reshape Europe’s battery competition

The slowdown in EV demand comes at a time when global battery production capacity has expanded rapidly, particularly in China. The result is a growing imbalance between supply and demand, intensifying competition across the industry. For newer European entrants like PowerCo, which began operations in the continent in 2022, this creates immediate pressure to compete with established, scaled players from Asia.

“The biggest challenge is cost competitiveness,” Braun says. “It’s the same way the Chinese OEMs did with their strategy some years ago. How did they go against the traditional carmakers? They built up scale, produced niche cars on a lower price level. Therefore, it’s not an option to be cost competitive. It’s an imperative.”

This dynamic is forcing companies to rethink not only production but also logistics, where inefficiencies can quickly erode already tight margins.

Battery supply chains bring new levels of complexity

Unlike traditional automotive supply chains, battery production depends on highly globalised and multi-stage value chains. A central tension in Europe’s battery strategy is the need to build local capability while remaining connected to global supply networks, particularly in Asia. That complexity introduces long lead times, often measured in months rather than days, and increases exposure to geopolitical, regulatory and environmental disruption.

Braun highlights that it’s important to understand and manage these risks across the entire battery supply chain, from raw material sourcing through to final production. “It's a global supply chain and much more dependent on several steps in the value chain than it is in the normal car manufacturing world,” Braun says. As a junior partner in raw material sourcing, VW Group and PowerCo focus on creating technology partnerships and long-term collaborations.

CATL, which has rapidly expanded its presence in Europe, exemplifies this balance. The company operates globally but continues to rely on its established supply base in China. CATL has invested heavily in European production, including facilities in Germany and Hungary, alongside joint ventures with OEMs. These moves are designed to improve responsiveness to regional demand while mitigating supply chain risks.

Stellantis and CATL break ground on LFP gigafactory in Spain

Stellantis’ 50:50 joint venture with battery maker CATL – Contemporary Star Energy – has broken ground on a 50 GWh lithium phosphate battery (LFP) gigafactory in Zaragoza, Spain, next to Stellantis’ assembly plant there.

Supply chain diversification and collaboration are central to this strategy. CATL operates 13 production bases in China and acts on a global scale, but the company aims to be closer to customers and react to market and supply chain disruptions. Learning from the increased density of crises over the past five years, CATL has expanded its global presence. The company opened its first European office in Munich, Germany in 2014, and began constructing its first factory in Germany four years later. A factory is currently under construction in Debrecen, Hungary, targeting a capacity of up to 100 GWh, and a joint venture with Stellantis will establish another factory in Spain.

The strategy is to “deliver local-to-local, while relying on the Chinese supply chain base,” Kruekov says.

Both PowerCo and CATL stress the need for supply chains that balance cost efficiency with flexibility and control. That includes decoupling processes, using multiple transport modes and building in adaptability to respond to disruptions.

“If you have long supply chains, and we do have them in the battery cell manufacturing world, we have it from the raw materials to our production, then you need to be intelligent enough to decouple processes and also make them as agile as possible. We have to be flexible, adaptable, but controlling,” Braun says. “You have to be in control of [the supply chain], otherwise it controls you. That is the worst thing that can happen.”

CATL’s Kruekov says there needs to be a deliberate balance between optimising the supply chain for inventory and cost, and maintaining adaptability by decoupling processes so the supply chain can respond to shocks.

To help address some of the more complex and costly aspects of battery supply chains, PowerCo has researched the impact of cell design on logistics. The company uses a prismatic unified cell design, which can simplify packaging and storage, leading to savings and simplifying the process of scaling.

Partnerships replace transactional models

Traditional, transactional supplier relationships are no longer sufficient in such a complex and capital-intensive environment. Instead, the industry is shifting towards long-term partnerships based on shared investment, risk and data transparency.

“I don't need a service provider, I need a partner,” Braun says, stressing the importance of collaboration in scaling infrastructure, training and capabilities. “Because with a partnership you can really do that kind of stuff. And this kind of discussion and then preparing ourselves, this is the most important thing that we are capable to provide data and good data, good information and having your own. I don't leave it up to somebody outside to make up my mind and to also to bring up the information that is needed."

Kruekov echoes this view, highlighting the need for joint investment and long-term commitment. “If you want partners to grow with you, you need to build real partnerships, not just short-term contracts.”

He says the focus is on providing and sharing good data and information, making sure partners understand the purpose behind information requests.

While European supply chains have historically prioritised flexibility and competition, Chinese models often emphasise deeper, more integrated relationships where companies share risks and leverage opportunities together.

Learning from ‘China speed’ with European constraints

VW Group speeds up production cycle with ‘In China, for China’ strategy

VW Group has delivered its first vehicle off the production line through its “In China, for China” strategy, with the ID.UNYX 08 having been developed in just 24 months and now entering series production.

While Europe is taking some learnings from China, there is a gap between China’s rapid execution and Europe’s more complex regulatory environment. China’s ability to scale quickly is driven by industrial capability but also, crucially, by policy support and streamlined processes. By contrast, European projects often face longer timelines due to regulatory and administrative hurdles.

“There are too many barriers,” Braun says, pointing to permitting challenges and compliance requirements. He and Kruekov agree that Europe should not simply replicate China’s model, but adapt its principles, combining speed and pragmatism with local conditions. China has had a 20-year start in technology, production equipment and expertise, which can provide a learning opportunity for Europe’s automotive supply chain.

BESS, aftermarket and service networks take centre stage

As the battery ecosystem matures, aftermarket services are emerging as a critical component of the supply chain. CATL has built an extensive service network across EMEA, covering more than 116 countries, with more than 100 cities with service presence, 70 service stations and over 1,000 technicians in the field daily. This infrastructure is essential to ensuring uptime, managing repairs and supporting customers across diverse markets.

“You can have the best service partner in the world,” Kruekov says, “but if you don’t have spare parts, there’s nothing you can do.”

The scale and complexity of the EMEA region, spanning dozens of countries, languages and regulatory environments, make this a significant logistical challenge.

Battery energy storage systems (BESS) are emerging as a major growth area, often exceeding earlier expectations. BESS addresses the challenge of storing electricity produced from renewable sources when consumption is low, and the sector is expanding rapidly across Europe and beyond. For battery manufacturers, this offers an opportunity to diversify demand and improve capacity utilisation. CATL holds approximately 37% of the global market share in this segment.

However, it also introduces new logistical challenges. Large-scale storage systems are often shipped as full container units, requiring specialised transport, installation and service capabilities. Service involves opening containers and replacing heavy batteries which can weigh between 300kg and 350kg.

VW Group has adopted a holistic approach, including “Ellie”, a charging provider which is now expanding into external storage systems. PowerCo has identified BESS as a strategic investment area, as growth in demand for BESS can help leverage and better utilise factories, aiding in scaling production.

“Within PowerCo, we identified this as one of the strategic fields we need to invest in,” says Braun. “This is a crucial thing we are also stepping into.”

This growth also presents opportunities for entering new industries, such as providing power for AI data centres.

Battery supply chains in Europe: An industry still maturing

Despite growing collaboration, both Braun and Kruekov acknowledge that the battery sector is still in a relatively early stage of development. Direct cooperation between competitors remains limited, particularly in areas related to intellectual property. However, there is increasing scope for collaboration through shared logistics partners and industry platforms.

Over time, as the market matures, deeper collaboration is expected to emerge. For now, the focus remains on building the foundations of a resilient, competitive supply chain that is capable of supporting Europe’s long-term electrification goals.