China has imposed limitations on exporting key technologies used in manufacturing electric vehicle batteries, aiming to strengthen its control over this industry which has helped maintain its advantage in the worldwide push toward electric vehicles.
Various techniques employed in producing electric vehicle batteries and processing lithium, an essential mineral for battery production, have been included in the government's export restriction list.
Being included on the list implies that moving the technologies abroad—such as via trade, investments, or technical collaboration—will necessitate a permit from the government, according to a statement by the nation's Department of Commerce.
New measures reflect comparable limitations implemented only three months earlier for specific items rare earth metals and their magnetic properties elements from the rare earth group and their magnet applications materials known as rare earths and their associated magnets the category of rare earth elements along with their magnetic components substances classified as rare earth materials and their use in magnets - crucial components are utilized not just in electric vehicle manufacturing, but also in consumer electronics and defense systems like jet fighters. China's control over the rare earth supply chain has become one of its significant advantages. most potent tools in an updated conflict over trade with the United States.
China has become a major force in the fiercely competitive international electric vehicle industry, partly due to its capacity to create advanced, affordable batteries via an extensive supply network, spanning from raw material handling to battery production.
A large number of automobile producers across the globe incorporate Chinese electric vehicle batteries into their cars. Chinese electric vehicle battery companies hold a minimum of 67% of the worldwide market share, as reported by SNE Research a company specializing in market research and advisory services.
First proposed in January The most recent licensing regulations have introduced doubt regarding the international growth strategies of Chinese electric vehicle manufacturers, especially in regions such as the European Union. employed tariffs To encourage them to establish operations there, Chinese car exports are being promoted. Several Chinese battery companies also intend to produce locally in regions like Southeast Asia and the U.S.
The Department of Trade stated that the limitations "are intended to protect national economic security and developmental interests, as well as encourage global economic and technology collaboration."
Liz Lee, who serves as an associate director at Counterpoint Research, stated that the action "intensifies the growing technological separation between nations, extending from raw materials to manufacturing intellectual property." She further noted that this development might speed up initiatives led by the U.S., European Union, and other regions to enhance local production of essential chemicals and metal refinement processes.
The leading global manufacturer of electric vehicle batteries, China's CATL, which supplies power to Tesla, operates facilities in Germany and Hungary and intends to establish a joint production facility in Spain alongside Stellantis, parent company of Fiat and Chrysler. Additionally, it is granting licenses for its technology to support an upcoming Ford electric vehicle battery plant in Michigan. According to a representative from Ford, the company remains "unaffected" by these recent regulations.
Meanwhile, Chinese EV giant BYD which produces its own batteries and surpassed Tesla in 2024 sales to claim the title of the top electric vehicle manufacturer globally, operates EV manufacturing plants across various countries including Hungary and Thailand as well as Brazil.
Additionally, Gotion, a leading Chinese electric vehicle battery manufacturer, intends to construct a manufacturing facility in Illinois.
has contacted CATL, BYD, and Gotion for their response.
Experts noted that the actual effect of the updated export restrictions is still unknown, since information is not yet clear.
Lee observed that the limitations "seem to focus on early-stage production techniques... instead of battery cell and assembly line manufacturing."
Because CATL's facilities in Germany and Hungary concentrate on battery cell and module manufacturing without seemingly duplicating the controlled procedures within those regions, the immediate impact might be minimal, she stated.
Lee also mentioned that for BYD, which currently only assembles battery modules outside of China and doesn't produce battery cells internationally, these measures seem not to impact their operations at this point.
Vincent Sun, a senior equity analyst at Morningstar who focuses on China's electric vehicle industry, stated that the final effect will rely on how readily firms can secure approvals — an aspect that "might require additional time to become clear."
The leading position of China in electric vehicle batteries
A portion of the recently introduced limitations involves the manufacturing process for battery cathodes used in producing lithium iron phosphate (LFP) batteries, a kind of lithium-ion battery that has gained significant popularity in electric vehicles over the past five years due to its more affordable cost and enhanced safety features. A second aspect addresses the handling, purification, and mining of lithium.
Fastmarkets, a research firm based in the United Kingdom, reports that China leads in the manufacturing of LFP batteries and the refinement of lithium worldwide. In the previous year, it accounted for 94% of the market share in terms of LFP battery production capability and supplied 70% of the world’s refined lithium output.
However, LFP batteries accounted for 40% of the global EV market by capacity, yet their use is more common in electric vehicles produced by Chinese companies compared to other regions, according to Adamas Intelligence a company specializing in data analytics and consulting within the realm of critical minerals and battery technologies.
James Edmondson, who serves as vice president of research at IDTechEx, a market analysis company, stated that although lithium iron phosphate (LFP) batteries have a lower energy capacity than their more commonly used counterparts containing nickel, manganese, and cobalt, their significantly reduced price has positioned them "as a standard option in budget-friendly cars." Additionally, there are intentions among European and American car manufacturers to increase their use of this technology.
China's leadership in producing LFP indicates that "even when LFP is made outside of China, Chinese vendors frequently contribute to manufacturing the precursors used in LFP cathodes," he stated.
China has a "substantial advantage" in the technology itself, as demonstrated by BYD’s “Super E-Platform” which offered a 250-mile range with only a five-minute charging session, Edmondson mentioned. This innovation surpasses Tesla's Superchargers, which require 15 minutes to provide 200 miles of range.
Not to lag behind, CATL introduced in April a more favorable offering, a upgraded LFP battery which offers an extended range of 320 miles without increasing the charging duration.
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