Crédit Mutuel Asset Management is an asset management company within Groupe La Française, the holding company for the asset management division of Crédit Mutuel Alliance Fédérale.
Europe’s transition to electric mobility is gaining pace. After a temporary slowdown in 2024, when electric vehicle (EV) sales grew by just +1%[1]¹, the market rebounded strongly in 2025, with growth of +34%. This recovery was driven by a broader range of entry-level and mid-range models, alongside a regulatory environment increasingly focused on decarbonizing transport[2].
Naturally, this acceleration is reshaping value chains across the European automotive sector and bringing into sharp focus the region’s heavy reliance on critical raw materials. Addressing this challenge will require a coordinated policy mix combining demand support, targeted reindustrialization and greater supply security.
Structural growth
European sales of battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) are expected to grow by 15% and 18% per year respectively between 2025 and 2030[3]. By the end of the decade, BEVs could account for around 42% of the European passenger car market, compared with approximately 16.4% in 2026.
At the same time, the distribution of value within vehicles is undergoing a profound shift. In a BEV, around 50% of the total value comes from the electric powertrain, with the battery alone accounting for close to 35%. By contrast, in internal combustion engine vehicles, the engine and transmission account for only about 18% of total value. Batteries, and the materials required to produce them, are therefore becoming a strategic concern.
A critical dependency
Europe, and its electric vehicle industry, remains heavily dependent on imported raw materials. The region sources around 99% of its natural graphite, 96% of manganese, more than 80% of its lithium and cobalt and nearly 98% of its refined rare earth elements from abroad, mainly from China[4]. This dependency is particularly pronounced for permanent magnets, which are essential for electric motors and for which China controls around 90% of global refining and production.
Recent geopolitical developments underscore the risks associated with this dependence. For example, on October 13, 2025, China announced new export controls on dual-use technologies. While primarily aimed at defense-related applications, these measures could disrupt the automotive supply chain by restricting access to key cathode and anode materials.
Importantly, this dependence is not due to a lack of geological resources. In the 1980s, Europe was among the leading producers of rare earth elements[5]. However, stricter environmental regulations and lower ore quality gradually increased production costs, while China expanded its output, supported by lower labor costs, abundant reserves and less stringent environmental controls. Today, reviving Europe’s domestic mining sector will depend on several factors: deposit quality, project development speed, access to financing, refining capacity and public acceptance of mining activities.
Recycling: a partial solution, but in 15 years
Against this backdrop, recycling represents a strategic lever. The Critical Raw Materials Act[6], adopted in 2024, sets a clear objective: to cover at least 25% of Europe’s annual consumption of critical materials through recycling by 2030. In the case of batteries, recycling could reduce the need for new extraction by 10% to 30% for several key minerals under a net-zero scenario.
Share of secondary supply in total demand for selected materials in the Net Zero Scenario, 2010-2040
Source : Outlook for key minerals – Global Critical Minerals Outlook 2024 – Analysis - IEA
Recycling also offers a dual benefit. On the one hand, it secures the domestic supply flow of lithium, nickel, cobalt, copper or graphite and protects against geopolitical shocks. On the other hand, it provides environmental advantages: producing one tonne of recycled aluminum generates up to 97% less CO₂ than primary production[1], with similar gains for other battery metals.
That said, recycling rates remain uneven. While they are relatively high for steel and aluminum, they remain very low for rare earth elements, at just 5% and 10% globally[2]. There is also a time constraint: battery lifespans of around 15 years mean that the first truly significant volumes of recycled materials are unlikely to become available before 2040. Until then, market growth will continue to rely largely on primary extraction.
Europe’s policy response
To address these vulnerabilities, Europe has committed to a strategy of targeted reindustrialization. The Critical Raw Materials Act sets out ambitious targets for 2030: 10% domestic extraction, 40% processing within Europe and a cap of 65% dependency on any single third country.
The European Commission has already identified 47 strategic projects across 13 Member States, representing a total investment need of approximately €22 billion. These projects span extraction, processing and recycling. At the same time, the ResourceEU[3] plan, adopted in December 2025, aims to mobilize around €3 billion in public funding to de-risk projects, coordinate procurement, support strategic stockpiling and accelerate investment decisions.
Despite these initiatives, it is clear that Europe’s supply security strategy cannot rely solely on domestic production. The European Union is therefore multiplying cooperation agreements with countries that have key resources or refining capacity, including Canada, Australia, several countries in Latin America and Africa, as well as Indonesia for nickel. These agreements aim to facilitate investment and harmonize environmental and social standards. In parallel, some Member States are directly investing in mining or refining projects outside Europe to secure industrial supply contracts.
The rapid growth of the European electric vehicle market reflects a structural trend, but it also exposes vulnerabilities related to the supply of critical materials. Securing access to these resources, combined with the development of recycling, will be decisive in supporting this transition. In this context, the energy transition appears as much a matter of sovereignty as a long-term investment opportunity.
Disclaimer
This commentary is provided for informational purposes only. The opinions expressed by Groupe La Française are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. The information contained in this publication is based on sources considered reliable, but Groupe La Française does not guarantee that it is accurate, complete, valid, or relevant.
Published by La Française Finance Services, headquartered at 128 boulevard Raspail, 75006 Paris, France, regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673, and registered with ORIAS (www.orias.fr) under no. 13007808 on November 4, 2016, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 boulevard Raspail, 75006 Paris, is an asset management company authorized by the Autorité des Marchés Financiers under no. GP 97 138 and registered with ORIAS (www.orias.fr) under no. 25003045 since April 11, 2025. Public limited company with capital of €3,871,680, RCS Paris no. 388 555 021.
[1] Jefferies March 9 2026 Made in Europe: A Catalyst for European Industry? Europe Sustainability & Transition Strategy
[2] Jefferies March 9 2026 Made in Europe: A Catalyst for European Industry? Europe Sustainability & Transition Strategy
[3] Jefferies March 9 2026 Made in Europe: A Catalyst for European Industry? Europe Sustainability & Transition Strategy
[4] Kepler Chevreux, Transition enablers, 4/11/2025, Playing critical minerals in Europe, Josep Pujal
[5] Kepler Chevreux, Transition enablers, 4/11/2025, Playing critical minerals in Europe, Josep Pujal
[6] European Commission. European Critical Raw Materials Act, Regulation proposal 2023/0079 §: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1661
[7] .JP.Morgan 17 November 2025 Global Research / Sustainable Investing Research. The Sustainable Investor. Critical minerals: Unearthing alpha across equities and credit
[8] J.P.Morgan Asia Pacific Equity Research. Transition Talks Critical Minerals, Critical Shifts: Rare earth elements expert call takeaways 30 septembre 2025
[9] Commission adopts RESourceEU to secure raw materials, reduce dependencies and boost competitiveness
