The implementation of the new European battery law has shaken the power battery industry

August 12, 2023

On July 30, the European "New Battery Law" regulation boots landed.


On June 14, the European Parliament announced that the Parliament passed the new EU battery regulations with 587 votes in favor, 9 votes against, and 20 abstentions. As stipulated in the legislation, the regulation will take effect 20 days after its passage. On July 10, local time, the European Council passed the relevant agreement on the "New Battery Law" previously approved by the European Parliament. On July 30, the regulations came into effect.


The New Battery Law, originally proposed by the European Commission in 2020, aims to regulate the full life cycle of all types of batteries sold in the EU, including design, production and recycling. According to the regulations, future electric vehicle batteries and rechargeable industrial batteries must have carbon footprint declarations and labels, as well as digital battery passports to enter the EU market, and have made relevant requirements for the recycling ratio of important raw materials for batteries.


The EU's new regulations are regarded by the industry as a "green trade barrier" for new batteries to enter the EU market in the future, raising the threshold for all other battery products, including Chinese battery products, to enter the EU market, and will also change the entire cycle of the battery industry chain.


The EU's new battery law can be said to kill two birds with one stone, and has a huge impact on power battery companies around the world.

First, the new regulations are aimed at Chinese power battery companies.


China has been slightly short on carbon footprint. Although the concept of carbon footprint has been put forward, it lacks perfect laws and regulations in actual implementation. At present, only a few provinces and cities have introduced relevant policies, and the new energy vehicle industry has just launched the first carbon footprint platform.


The EU has established a complete carbon footprint evaluation system, and has issued detailed EU method guidelines and product accounting rules for different industries. Insufficient and surplus, in a disadvantaged situation, China's power battery companies may have to experience some "earth shaking" in the European Union.


The EU is an important market for the export of China's new energy vehicles and power battery products. In 2022, new energy vehicles exported to Europe will account for 49%. In addition to the huge export volume, there are not a few Chinese power battery companies building factories in Europe. According to incomplete statistics, at present, CATL, EVE Lithium Energy, Honeycomb Energy, Envision Power, Guoxuan High-Tech, China Innovation Aviation, Funeng Technology, and Blue Lithium are the main Chinese new energy companies that have put into production overseas.


Whether it is building factories or exporting, the EU has become an important area for in-depth cooperation among Chinese power battery companies. Once the new battery law is passed, China's new energy vehicles and power batteries to Europe will need to add more processes and prepare more relevant certificates. After the process becomes more complicated, the cost of related products sold in China to Europe will increase significantly. If the original price is not changed, the net profit will be severely suppressed. If the price is increased, the competitiveness in the European market will decline.


Second, use your own strengths to attack the other's weaknesses. EU companies have a relatively complete carbon footprint system, which provides opportunities for local companies to develop.


China's share in the power battery market is rising rapidly. According to statistics from research institutions, the proportion of China's power battery installed capacity in Europe has continued to increase in the past four years, reaching 11.8%, 16.8%, 22.6%, and 34% in 2019-2022, respectively. The greatest pressure comes from China's complete battery industry chain, and 70% of the world's battery production capacity is in China.


It is foreseeable that China will continue to expand. The EU's move provides development opportunities for the improvement of the competitiveness of the local battery industry.


The new regulations stipulate that each battery must have an "ID card", in addition to basic information, it also needs to have the entire carbon footprint from production to export. This means that from the calculation of labor and equipment at the origin of raw materials to the end of final export, the product needs to have clear carbon emission data, which is also equivalent to a product resume. Such a piece of information consumes a lot of labor and time.


In addition to calculating their own carbon emissions clearly, the carbon emissions of raw material suppliers also need to be calculated clearly. If the relevant manufacturers do not meet the requirements, they need to find new manufacturers that meet the regulations. It is not an exaggeration for power battery manufacturers. 


Putting aside the market dispute, the new battery law has advantages and disadvantages. One is that under very harsh conditions, the innovation of products will be greatly reduced. Now that power batteries are in need of innovative breakthroughs, it is not conducive to development. Second, in the long run, all enterprises will be "manually" included in carbon emissions It is a strong impetus for the low-carbon transformation of enterprises.


In the dual carbon goals, the EU has been at the forefront. The EU's new battery law, like the earlier carbon tariffs, is a "weaponization" of compliance development.


Regarding carbon tariffs, the EU's plan is to be officially implemented in 2026, and they were all trial runs before. That is to say, relevant companies can carry out transactions with "a piece of paper", but when the regulations actually start, it means that companies need real money to pay for the carbon emissions generated by their products. Taking a sample from Deloitte as an example, if the import of CBAM-applicable goods contains one ton of carbon emissions, the importer needs to purchase a certificate at a price of 90 Euros, which means that the import cost of the importer will increase by 90 Euros accordingly. EUR.


There is still a chance to redeem the superposition of carbon tariff costs. Before the real regulations are implemented in 2026, if China has established relevant carbon tariffs and become an international common law, enterprises will not need to pay again during the export process. However, if the relevant systems are not perfected before then, enterprises going overseas will suffer heavy losses.

However, the implementation of the new battery law has no emotion. In this "earthquake" of the industry, it is the real ability of enterprises to find new opportunities amidst changes. It can be predicted that there will be many similar regulations in the future. Only by building their own "armor" can Chinese enterprises go further in this "environmental protection journey".