The European Union has approved a plan that will deliver state aid to firms in the battery supply chain aimed at building up expertise and local production in the battery sector in the long-term.

The EUR2.9bn 'European Battery Innovation Project' follows the launch in 2017 of the 'European Battery Alliance' aimed at supporting the switch to EVs and away from fossil fuels in the transport sector.

The project will cover the entire battery value chain from extraction of raw materials, design and manufacturing of battery cells and packs, and finally the recycling and disposal in a circular economy, with a strong focus on sustainability. It is expected to contribute to the development of a whole set of new technological breakthroughs, including different cell chemistries and new production processes, and other innovations in the battery value chain.

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Some 42 companies are signed up, including BMW and Tesla. Project funding will come from a group of countries including France, Germany, Austria, Belgium, Croatia, Finland, Greece, Poland, Slovakia, Spain and Sweden. The European Commission also said it aims to attract EUR9bn from private investors.

The direct participants will closely cooperate with each other through nearly 300 collaborations envisaged, and with over 150 external partners, such as universities, research organisations and SMEs across Europe. The overall project is expected to be completed by 2028 (with differing timelines for each sub-project).

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European Commission Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "For those massive innovation challenges for the European economy, the risks can be too big for just one Member State or one company to take alone. So, it makes good sense for European governments to come together to support industry in developing more innovative and sustainable batteries. Today's project is an example of how competition policy works hand in hand with innovation and competitiveness. By enabling breakthrough innovation while ensuring that limited public resources are used to crowd in private investment and that competition distortions are minimised. With significant support also comes responsibility: the public has to benefit from its investment, which is why companies receiving aid have to generate positive spillover effects across the EU."

EC Vice-President Maroš Šefcovic, in charge of the European Battery Alliance, said: "Thanks to its focus on a next generation of batteries, this strong pan-European project will help revolutionise the battery market. It will also boost our strategic autonomy in a sector vital for Europe's green transition and long-term resilience. Some three years ago, the EU battery industry was hardly on the map. Today, Europe is a global battery hotspot. And by 2025, our actions under the European Battery Alliance will result in an industry robust to power at least six million electric cars each year. Our success lies in collaboration, with some 300 partnerships between industrial and scientific actors foreseen under this project alone."

Commissioner for Internal Market Thierry Breton said: "The batteries value chain plays a strategic role in meeting our ambitions in terms of clean mobility and energy storage. By establishing a complete, decarbonised and digital battery value chain in Europe, we can give our industry a competitive edge, create much needed jobs and reduce our unwanted dependencies on third countries – in short, make us more resilient. This new IPCEI proves that the European Battery Alliance, an important part of the EU industrial policy toolbox, is delivering."