(Yicai) Dec. 8 -- The European Union’s EUR3 billion (USD3.2 billion) subsidy for new energy firms and battery makers that was rolled out earlier this week has very high requirements on the sourcing of local materials that will make it more expensive to produce batteries, the chief executive officer of Chinese battery maker SVOLT Energy Technology said.

“To be eligible for the subsidy, battery manufacturers must ensure that over 60 percent of their suppliers are European firms by 2027,” said Yang Hongxin, whose Changzhou-based company runs two plants in Germany. Although it is easy to source anode materials, it is very difficult to buy cathode materials from European firms as the factories are expensive to run due to the high price of electricity, he added.

“The subsidy is good news for Chinese battery makers, but the requirements are high, particularly the one about purchasing materials from local suppliers,” said Yu Qingjiao, secretary-general of the Zhongguancun New Battery Technology Innovation Alliance.

The EU is using the subsidy to form its own battery industrial chain, Yu said. Chinese battery makers should stay alert and properly assess the risks of going global because it is still possible that the EU may raise trade barriers.

The EU has also tightened restrictions on batteries that are imported into the bloc, which will have a big impact on Chinese car and battery makers. From 2027, all batteries exported to Europe must have a ‘battery passport’ which has strict requirements regarding the carbon footprint, battery recycling and the use of recycled materials, according to the Regulation Concerning Batteries and Waste Batteries released in August.

Editor: Kim Taylor