By Philip Blenkinsop

BRUSSELS, March 2 (Reuters) – Increased production in Europe could reduce the cost gap between batteries made in the EU and those from China to around 30 percent from the current 90 percent, transport and environment campaign group T&E said in a report on Monday, urging the EU to support the sector with its “Made in Europe” plans.

The EU executive will propose its “Industrial Acceleration Act” on Wednesday, with requirements to prioritize locally made products when public money is used. It is designed to cover “key strategic sectors” such as batteries, solar and wind power, hydrogen manufacturing, nuclear power and electric vehicles.

Some carmakers have said the local content requirements would make batteries too expensive and hurt the competitiveness of their models.

The T&E report said improved manufacturing efficiency, particularly through lower scrap rates, as well as knowledge and automation of labor, could narrow the cost gap to $14 per kilowatt-hour by 2030 from a potential $41.

That would equate to a gap for an average electric vehicle of 500 euros ($590), which could be even less with public incentives or treated as an insurance premium against the kind of export restrictions China has already placed on critical minerals and rare earths.

“Europe needs a national battery industry as an insurance policy against the weaponization of its supply chains. Local content requirements are the only policy on the table to avoid another Northvolt. The cost of Made in EU rules is a sovereignty premium worth paying,” said Julia Poliscanova, T&E’s senior director of vehicle supply chains and e-mobility chains.

The cost gap would only narrow if the EU’s local content requirements allowed companies such as ACC, Powerco and Verkor to increase production.

The Made in Europe plan should specify that public support schemes explicitly include tax rebates for owners of electric vehicles, as well as for employers and employees in corporate car schemes, T&E said.

($1 = 0.8464 euros)

(Reporting by Philip Blenkinsop; Editing by Hugh Lawson)