Why Europe’s Battery Boom Could Trap Unwary Investors

 A fast track from founding to expansion to a listing bid on the Hong Kong Stock Exchange (HKEX) in the course of only six years might hide Hithium’s high-risk profile behind the hype. 

As Europe is racing to secure its energy transition and net zero goals, batteries and the infrastructure capable of supporting a mostly renewables-powered electricity grid have become valuable and essential strategic assets. In light of investments stalling in Europe’s homegrown battery makers and the difficulties European producers face in competing with Asia’s rising stars, however, a new major battery manufacturer’s listing on the HKEX may appear as a lucrative business opportunity. More often than not, investors should proceed with caution.

This is not only advised due to the HKEX’s recently implemented relaxation of its listing rules that have allowed even pre-revenue biotech and high-tech companies to be listed on the exchange, which has drawn criticism from those favoring a stricter due diligence regime. As sustainable profitability is an explicit target for European investors – both public and private – the fact that global battery manufacturers increasingly often rely on heavy government subsidies, preferential financing and tax breaks tied to political goals of electrification and development should raise red flags.

Such factors greatly increase a company’s risk profile and opportunities for sustainable growth. A company’s declared profits may not reflect actual competitive advantage, and when subsidies dry up, a firm’s cash flow could altogether collapse. At the same time, tales of major foreign-based expansion projects should be carefully evaluated against the constraints posed by increasingly protectionist trade and investment policies abroad.

For European investors who prioritize long-term viability over headline growth, these indicators matter deeply.

A recent example among Asian battery producers that have sought entry into European markets is Hithium Energy Storage, which in September 2025 signed a business development agreement with Solarpro, Europe’s leading EPC provider, to support utility-scale projects in Hungary, Romania, Bulgaria and North Macedonia. Hithium is among the many tech firms that have recently sought public offering on the HKEX to gain access to private funding. While its bid was initially rejected by the exchange, the company is actively preparing for resubmission.

The HKEX’s new and relaxed entry rules may prove inadequate to uncover a number of inconsistencies in the company’s track record and declared portfolio of business growth. For one, its balance sheet is heavily propped up by state subsidies provided by the Chinese government, which increased by 60% from 2024 to 2025, reaching 334 million RMB in the first half of the year alone. In addition to this, Hithium’s trade receivables turnover in days increased to 227 days in 2025.

The promise of foreign expansion the company declared in its submissions to HKEX should be further investigated. It touted its opening in the United States of a ‘state-of-the-art’ energy storage manufacturing facility – failing to highlight that the Texas-based facility is merely an assembly plant. As this does not change the U.S.’ new country-of-origin classification, batteries compiled in the plant by Hithium will be treated as Chinese goods, which a 34% tariff applies to.

European investors should also heed warnings about the reputational issues the company is mired in. In 2023, CATL, the leading firm in the global battery manufacturing industry sued Hithium’s founder and CEO, Wu Zuyu on the grounds of violating intellectual property rights laws by developing his new venture while still working for CATL. Hithium has been accused of poaching several CATL employees and effectively transplanting proprietary technology. Wu eventually paid a 1 million RMB fine to CATL, but a new lawsuit filed in 2025 still claims unfair competition posed by the firm.

There are several risks associated with investing in a company with the above record, which includes doubts about its respect for the rule of law and the consequent and potential litigation risk that it invites, which can distract from its routine operations. As corporate governance standards are a necessary criterion for European investors, this presents a major risk signal.

Europe’s battery strategy as part of the REPowerEU and IPCEI plans is built on transparent and sustainable business models. Sovereign wealth funds, institutional investors and pensions funds alike already have an exposure to Asian firms, but they must balance the promise of returns against regulatory and governance risks. Promises of scale and further growth should be carefully examined before making investments, especially considering the HKEX’s relaxation of its entry rules for initial publica offering. European investors can hedge against perceived risks by demanding full transparency on subsidy dependencies, conducting independent audits testing cash flows, and assessing the viability of expansion in foreign markets in the case of companies like Hithium.

As listing on the HKEX may generate further hype about a company’s prospects, investors should question what cost it comes at and for whose benefit.