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Key takeaways:
In the first five months of 2026, nearly a million new battery-electric cars were registered in the EU, giving BEVs a 20% market share, while hybrid-electric vehicles remained the largest powertrain category with a 37.8% share according to ACEA statistics.
OEMs must balance the profitable scaling of EV production against demand uncertainty, volatile battery raw material costs, evolving regulatory pressures and increasingly price-sensitive consumers.
Automotive OEMs have a long history of managing raw material costs, but the landscape is changing.
The transition to zero-emission powertrains has introduced a range of costly electrochemical-grade battery feedstocks, including lithium, nickel, cobalt, graphite, manganese and black mass. It has increased the use of battery ancillary metals such as copper and aluminium, which are fundamentally reshaping the economics of vehicle manufacturing.
For European OEMs, visibility across these markets is no longer optional. Battery cost competitiveness increasingly depends on understanding how raw materials move across regional pricing, refining bottlenecks, recycling flows and supply chain constraints.
Lithium remains a focal point. While recent volatility has eased from peak levels, uncertainty persists around supply growth, demand projections and project viability.
Discussions ahead of Fastmarkets’ 2026 lithium conference reinforce that market participants remain divided on how quickly supply will rebalance and how resilient demand growth will be.
Lower prices may support short-term margins but risk destabilizing upstream investment, while higher prices increase exposure just as OEMs push toward more affordable EV models.
Although EV demand is strengthening, it is far from uniform across Europe. Growth is concentrated in Europe’s major Western EV markets, while Eastern European markets continue to lag further behind.
Europe’s top five auto markets have all seen significant BEV growth year-to-date in 2026, though Eastern European markets continue to see their growth driven by Chinese PHEV imports.
This fragmentation matters for procurement and planning. OEMs cannot rely on a single demand curve when determining battery material requirements. Instead, they must forecast demand at a more granular level, by geography, vehicle segment and powertrain mix.
Hybrid and plug-in hybrid vehicles remain particularly important. According to ACEA statistics, hybrids accounted for nearly 1.8 million registrations in early 2026, while plug-in hybrids reached 460,000 units.
This diversification complicates sourcing strategies. While hybrid vehicles use smaller battery packs, they increase the number of battery configurations in the market. As a result, OEMs must manage exposure across multiple chemistries, suppliers and material intensities simultaneously.
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In response, European OEMs are shifting away from static sourcing models toward more flexible procurement strategies.
Traditional approaches based on annual negotiations and fixed assumptions are increasingly misaligned with reality. Battery raw material prices can shift rapidly, while supplier pass-through of costs, including carbon, is often opaque.
Independent pricing benchmarks are therefore becoming essential. As seen in the context of CBAM and EU ETS, OEMs are using benchmarks to validate supplier costs, improve negotiating leverage and ensure pricing transparency across critical inputs.
The same principle applies to battery materials. Access to reliable price assessments allows OEMs to distinguish between genuine raw material movements and inflated supplier pricing, particularly in volatile markets.
Fastmarkets’ battery raw materials suite supports this by combining price data, forecasts and cost indices, enabling companies to benchmark costs, manage risk and align procurement with real market conditions.
Battery chemistry has become a key lever for managing costs, and OEMs are now increasingly weighing the trade-offs between energy density, cost stability and supply chain risk.
Nickel-rich chemistries offer higher performance at the cost of higher raw material prices and greater market volatility. LFP chemistries reduce that exposure and increase automotive profitability but at a cost of being heavily reliant on Chinese IP for premium LFP batteries.
Premium EVs can absorb higher-cost chemistries if they deliver performance advantages. Mass-market vehicles, however, require tighter cost control, especially as competition from lower-cost manufacturers intensifies.
As a result, many OEMs are prioritizing flexibility by designing standardized cell-to-pack platforms that accommodate multiple battery chemistries, allowing them to respond more quickly to changing market conditions.
Battery recycling is becoming an increasingly important part of the supply chain, but it is not yet a near-term solution to cost volatility.
Market developments highlight the challenges. Ahead of the 2026 lithium conference, Fastmarkets noted continued disruption in the recycling sector, including funding pressures, bankruptcies and feedstock constraints in North America.
Although the European market differs, the underlying dynamics match. Recycling economics depend on raw material prices, processing costs and the availability of end-of-life batteries. Fastmarkets’ Q2 2026 recycling forecast shows that Europe has significant shredding overcapacity, with black mass generation capacity far exceeding scrap supply.
The report also notes that hazardous-waste rules make black mass harder to move within Europe, while demand from South Korean refiners creates an incentive for some European recyclers to stop at black mass production rather than invest in more complex domestic refining.
For OEMs, recycling should therefore be viewed as a strategic, long-term play rather than an immediate hedge. Long-term, black mass markets and recycled material flows will play a larger role in supply, but they still require robust price discovery and transparency.
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Battery raw material costs are only part of the equation. European OEMs are also dealing with rising carbon-related costs across their supply chains.
Under the EU’s regulatory framework, emissions costs are increasingly embedded in key materials such as steel, aluminium and batteries. These costs are transitioning from indirect considerations to direct components of vehicle bills of materials.
As free allocations decline under the EU ETS and CBAM comes into effect, carbon pricing is expected to play a larger role in sourcing decisions and supplier negotiations. This reinforces the need for accurate data, not just on material prices, but also on embedded emissions.
For OEMs, the implication is clear: they cannot manage battery materials in isolation. Instead, they must consider cost, carbon and compliance together, taking a more integrated approach across procurement, sustainability and finance teams.
Battery raw materials, carbon costs and demand variability are all feeding into a more complex cost environment. At the same time, competitive pressure is increasing, particularly as OEMs push toward more affordable EVs.
Independent benchmarks are helping to address this challenge by providing a shared reference point across organizations. They enable better negotiation with suppliers, improved internal alignment and more informed decision-making around sourcing and pricing.
OEMs will be best positioned to manage volatility and maintain profitability if they can effectively combine market intelligence with flexible procurement strategies
The European EV market is continuing to grow, but the nature of that growth is changing. BEVs are gaining share, hybrids remain dominant and plug-in hybrids are expanding, creating a more diverse and less predictable demand landscape.
In this environment, battery raw materials are emerging as a defining factor in competitiveness. Managing these materials is no longer just a procurement challenge; it is a strategic priority that influences pricing, product development and long-term positioning.
The OEMs that succeed in this next phase of the EV transition will be those that treat battery materials as a core part of their commercial strategy, combining demand insight, independent price intelligence and flexible sourcing to build more resilient, cost-effective supply chains.
Gain clearer visibility into Europe’s evolving EV and hybrid landscape with Fastmarkets’ automotive data and insights solutions. Speak to our team today to learn more.