Could Batteries Power Central Europes's Future?

Barnabás Heincz

In a recent interview about the situation in Taiwan, Emmanuel Macron stated that Europe is “becoming a vassal” but could “become the third power” in the world order if given “a few years to do it.” [1] While the French president’s words have sparked diplomatic outrage, they serve as a necessary wake-up call. In recent decades, Europe has been forced into a subservient role in many areas, and if the continent is to survive and prosper, it needs to think for itself and become a third power in many aspects. The energy

1 Ébredj, Európa? – Macron lassan tényleg a kontinens vezetőjévé válik (Mandiner) https:// mandiner.hu/cikk/20230410_europa_emmanuel_ macron sector is the main area where this must happen, as Europe cannot exchange significant dependence on Russia for significant dependence on America, and the continent must establish strategic autonomy within its alliance system as soon as possible.

Regarding the energy sector, there are several ongoing transformations, with one of the most significant being electrification. The scientific and political elites are looking towards the electrifying our everyday activities, and electromobility is an indispensable aspect of this model. Surprisingly, Europe is not doing poorly in the field of electromobility. The continent’s car manufacturers keep announcing new models that are at the top of their class in terms of both performance and quality. However, the COVID-19 pandemic and Russian aggression have shown that producing something is not enough. Instead, it is necessary to have significant capacity in all production areas because supply chains are vulnerable and can bring whole industries to their knees.

The strategic autonomy of European electromobility lies in battery production. In 2022, China accounted for 77% of global battery manufacturing capacity, followed by Poland with 6%. Hungary is in fourth place with 3%, while regional powers such as France, Japan and South Korea are at 1%. Central Europe has a total installed production capacity of 9%, which is significant at the global level, but still far from sufficient. Reducing China’s global share is in Europe’s interest and is a pledge of its strategic autonomy[2].

According to conservative estimates, global demand for batteries will increase tenfold between 2020 and 2030, leading to a highly competitive market. The Central European region may emerge as the winner in this race, with Hungary predicted to become the fourth largest battery producer in the world by 2027, followed by Poland in sixth place.

2 Europe runs on Polish lithium-ion batteries (PSPA) https://t.co/pa0lf0fE94 could also result in a decline in China’s global to 69%.

This While Western investors dominate the battery industry in Poland (Northvolt, Mercedes-Benz, Johnson Matthey), Hungary is open to Eastern investors such as CATL, Samsung, and SK Innovation. The Hungarian approach is to diversify the market with investors from the Far East, mainly South Korean and Chinese, and to combine it with the demand from German car manufacturers in the country[3]. The Hungarian car industry accounted for 18% of GDP in 2019 and, for a long time, it was questionable what model the Hungarian automotive industry could adapt to the challenges of electromobility[4]. Battery production appears to be the answer. For instance, BMW has built a car plant in Debrecen, and China’s CATL will invest $7.3 billion in the city. Additionally, South Korea’s SK Innovation is investing $2.3 billion in developments alongside existing factories, and Samsung’s factory is already operational[5] .

Hungary’s economy is capitalizing on the potential of battery manufacturing from the Far East, contributing not only to the energy sector but also to other areas of the economy. Despite economic difficulties, Hungary broke its investment record in 2022, with 48% of investment coming from the East led by South Korea and 42% from the West6 . Electromobility investments from

3 Europe runs on Polish lithium-ion batteries (PSPA) https://t.co/pa0lf0fE94

4 IMF: Szlovákia és Magyarország a legkiszolgáltatottabb az autóiparnak (növekedés. hu) https://novekedes.hu/elemzesek/imf-szlovakiaes-magyarorszag-a-legkiszolgaltatottabb-azautoiparnak

5 The road to the future – The battery plants set to be built in Hungary (Hype&Hyper No. 7. / 2023.)

6 Szijjártó Péter: a keleti és nyugati gazdaság találkozási pontja az elektromosautó-ipar (Infostart the Far East also have spin-offs from which the whole region can benefit, not only economically but also in terms of innovation and collaboration. In the broader energy field, there is no energy security in Central Europe without Azerbaijan, Turkey, or Kazakhstan. Suppliers from the East are always needed to counterbalance the monopoly situation coming from the Western markets and to achieve a state of equilibrium. This chance has not been given with Russia’s energy dependence, and the awakening has had a shocking effect on the economies and public opinion of European states./ MTI) https://infostart.hu/gazdasag/2022/12/28/ szijjarto-peter-a-keleti-es-nyugati-gazdasagtalalkozasi-pontja-az-elektromosauto-ipar

Battery production capacity in Central Europe is expected to maintain its strong global position in the years to come, and Hungarian-Polish cooperation in this area must play a key role. Western investors in Poland and investors from the Far East in Hungary can bring market know-how and strategic cooperation that the whole region should take advantage of. The countries in Central Europe play a major role in Europe’s strategic autonomy, and this will be no different in the energy sector. The innovation, research and development associated with electromobility should be brought into the economic orbit of both Warsaw and Budapest so that society can benefit in the long term and reduce the economic disparities with Western Europe.

Barnabás Heincz

May 2023