The new EU battery regulations will impact Chinese and Asian battery companies

The European Union's (EU) highly anticipated battery regulation came into force today after being officially announced 20 days ago. These new guidelines introduce significant changes that are expected to impact global battery producers, with companies in Chinese mainland and Taiwan at the forefront of these challenges.

Key highlights of the new rules:

From 2027 onwards, any power battery shipped to the European market must require a "battery passport". The path to this legislation spanned three years and saw Asian battery companies move from initial apprehension to active participation and finally embracing the exemplary shift to come.

With the implementation of the new battery law, Asian battery producers exporting to Europe will face three main challenges:

Carbon Footprint Declaration: From July 2024, the vast majority of batteries exported to Europe must be accompanied by a carbon footprint declaration and label. This requires companies to carefully collect, calculate, and disclose carbon emissions data throughout the battery lifecycle, from raw material extraction to production, to recycling and reuse. Many Chinese battery companies are currently struggling to solve this problem, and the main difficulty is the lack of comprehensive footprint data and mature LCA calculation tools to accurately measure these footprints.

Recycling and reuse of battery materials: The European Union's new directive sets specific quotas for the inclusion of recycled materials in power batteries. However, China currently lacks a robust mechanism to verify the use of recycled raw materials in batteries. The lack of a verification regime could pose a major challenge for future exports.

Battery passport information disclosure: From February 18, 2027, most power batteries entering the European market will require a detailed "battery passport", which will require the disclosure of about 90 mandatory data attributes. This will include details such as battery and manufacturer information, compliance and certification metrics, carbon footprint, supply chain due diligence, material composition and performance metrics.

China's position and response:

As a leader in the export of power batteries to Europe, China has taken the initiative to introduce a "battery passport" to align with these new European directives. This strategic move aims to ensure a seamless battery trade relationship between China and the EU. It is worth noting that China occupies an overwhelming position in the field of battery production, accounting for a staggering 77% of the global market share. In addition, China's EV battery market share in Europe is rising rapidly, from 14.9% in 2020 to 34% in 2023.

Broader implications:

The EU's transition to stricter battery regulations is a testament to its strong commitment to sustainability, responsible sourcing and advocating for a circular economy in the battery industry. The move is expected to set a global precedent and prompt other countries to follow suit.