CATL's Strategic Retreat from Valmet Automotive and Its Implications for European EV and Battery Manufacturing

The recent divestment of Contemporary Amperex Technology Co. Ltd. (CATL) from its 20.6% stake in Valmet Automotive marks a pivotal shift in the global electric vehicle (EV) and battery manufacturing landscape. This move, driven by a confluence of market dynamics and geopolitical recalibration, underscores the fragility of cross-border industrial partnerships in an era of decoupling and strategic autonomy. Finland’s acquisition of a majority stake in Valmet Automotive and its battery subsidiary, Ioncor, reflects a broader European trend of reasserting control over critical supply chains while navigating the complexities of slowing EV adoption and rising geopolitical tensions [1].

Strategic Capital Reallocation: From Europe to Southeast Asia and Beyond

CATL’s exit from Valmet Automotive is emblematic of a broader reallocation of capital toward regions where geopolitical risks are lower and growth prospects are more aligned with its long-term strategy. In Southeast Asia, CATL has aggressively expanded its footprint through projects such as the $6 billion Indonesia Battery Integration Project and partnerships in Thailand and Vietnam. These investments aim to establish a pan-Asian battery value chain, leveraging abundant raw materials and lower production costs [2]. Simultaneously, CATL is doubling down on Europe, where it has committed €7.3 billion to a gigafactory in Hungary and a joint venture with Stellantis in Spain. This dual strategy—divesting in politically sensitive markets while scaling up in regions with strategic alignment—highlights CATL’s ability to adapt to shifting geopolitical and economic currents [5].

The Finnish government’s rationale for acquiring Valmet Automotive and Ioncor extends beyond economic considerations. By injecting €120 million into the company and redirecting its focus toward defense manufacturing, Finland is positioning itself to address national security concerns and reduce reliance on foreign suppliers for critical infrastructure. This aligns with its 2025 Battery Strategy, which emphasizes self-sufficiency in battery materials and the integration of EV and defense production [1]. Such moves reflect a growing European consensus that industrial policy must prioritize resilience over efficiency, particularly in sectors deemed vital to national security [4].

Geopolitical Industrial Policy and the European EV Dilemma

The slowdown in European EV adoption—stagnating at 20% of new car sales in 2024—has forced policymakers to rethink their approach to electrification. The phasing out of subsidies in Germany and France, coupled with consumer hesitancy over high upfront costs and charging infrastructure gaps, has created a vacuum that Chinese automakers and battery producers are eager to fill [1]. While the EU’s 2025 CO2 emission standards offer some flexibility to automakers, the lack of a cohesive industrial strategy has left Europe vulnerable to supply chain disruptions and foreign dominance in key technologies [5].

CATL’s retreat from Valmet Automotive and its subsequent investments in Europe illustrate the paradox of European industrial policy: the need to attract foreign capital to build competitive battery ecosystems while mitigating the risks of overreliance on external suppliers. This tension is exacerbated by the EU’s recent imposition of tariffs on Chinese EV imports, which aim to protect domestic manufacturers but also risk alienating a key partner in the global battery value chain [6]. The result is a fragmented landscape where European automakers like Volkswagen and Stellantis are increasingly reliant on Chinese battery technology, even as policymakers seek to localize production [3].

Implications for the Future of European Manufacturing

The Valmet Automotive case underscores a broader transformation in European industrial strategy. As countries like Finland and Hungary pivot toward defense-oriented manufacturing and localized battery production, the traditional boundaries between automotive and industrial sectors are blurring. This shift is not without challenges: the EU’s push for 1 million public charging stations by 2025 and 3 million by 2030 remains aspirational, and the collapse of Northvolt in 2024 has exposed the fragility of European battery startups [4].

For investors, the key takeaway is the growing importance of geopolitical alignment in capital allocation. CATL’s ability to navigate regulatory hurdles in Europe—such as localizing its workforce and adapting to EU sustainability standards—demonstrates the value of strategic flexibility in an era of industrial nationalism [6]. Meanwhile, European governments must balance the need for foreign investment with the imperative to build self-sufficient supply chains, a task complicated by the EU’s internal divisions and the global competition for critical minerals [3].

In the long term, the interplay between CATL’s global expansion and Europe’s industrial policies will shape the trajectory of the EV transition. While the continent’s efforts to reduce reliance on Chinese inputs are commendable, the reality is that China’s dominance in battery production—accounting for over 75% of global lithium-ion output—will persist unless Europe can scale its domestic capabilities [6]. For now, the Valmet Automotive divestment serves as a cautionary tale: in a world where industrial strategy is inseparable from geopolitics, even the most promising partnerships can unravel when markets and nations realign their priorities.

Source:
[1] Strategic Geopolitical Realignment in European Automotive & Defense Supply Chains [https://www.ainvest.com/news/strategic-geopolitical-realignment-european-automotive-defense-supply-chains-assessing-investment-risks-opportunities-china-divestment-valmet-automotive-2509/]
[2] Power play: CATL driving China's foreign policy in SE Asia [https://asiatimes.com/2025/08/power-play-catl-driving-chinas-foreign-policy-in-se-asia/]
[3] China's role in Europe's battery supply chain transformation [https://www.automotivelogistics.media/nearshoring/how-nearshoring-and-battery-localisation-are-reshaping-europes-ev-supply-chain-amid-shifting-demand-chinese-competition-and-policy-shifts/207489]
[4] Finland's Battery Supply Chain Boost [https://discoveryalert.com.au/news/finland-battery-supply-chain-development-2025/]
[5] CATL, World's Top Battery Maker Secures Largest IPO of 2025 to Fund $7.6 Billion European Factory [https://www.riotimesonline.com/catl-worlds-top-battery-maker-secures-largest-ipo-of-2025-to-fund-7-6-billion-european-factory/]
[6] Pole Position: Chinese EV Investments Boom Amid Growing Political Backlash [https://rhg.com/research/pole-position-chinese-ev-investments-boom-amid-growing-political-backlash/]