{"id":473631,"date":"2025-10-04T13:24:11","date_gmt":"2025-10-04T13:24:11","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/473631\/"},"modified":"2025-10-04T13:24:11","modified_gmt":"2025-10-04T13:24:11","slug":"how-us-rules-are-rewriting-ev-supply-chains","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/473631\/","title":{"rendered":"How US Rules Are Rewriting EV Supply Chains"},"content":{"rendered":"

\"CATL<\/p>\n

Image Source:<\/b> Getty Images <\/p>\n

This is the 182nd\u00a0in the \u2018<\/strong>China Chronicles<\/strong><\/a>\u2019 series.<\/strong><\/p>\n

Washington\u2019s new \u201cforeign entity of concern\u201d rules and CATL\u2019s designation as a \u201cChinese military company\u201d highlight how US efforts to secure EV supply chains are reshaping clean energy, industrial policy, and geopolitics.<\/p>\n

The United States (US)\u2013China rivalry has now moved beyond tariffs and chip bans to critical raw materials (CRMs) that power electric vehicles (EVs), grid storage, and defence industries, turning supply chains into geopolitical terrain.<\/p>\n

At the heart of this is lithium batteries, essential for decarbonisation, energy storage, and military technologies. Among battery chemistries, lithium iron phosphate (LFP) has gained prominence for its lower cost and safety, making lithium a strategic lever, rather than a mere commodity. Control over lithium refining and LFP technology will dictate how quickly and affordably the world electrifies.<\/p>\n

Moreover, since battery-grade refining and materials determine EV costs and deployment timelines, and with the International Energy Agency (IEA<\/a>) warning of potential lithium tightness as electrification accelerates, the stakes are exceptionally high. Consequently, for the US, securing these supply chains is about more than industrial growth; it is about energy independence and strategic advantage.<\/p>\n

In this context, Contemporary Amperex Technology Co. Limited (CATL), the world\u2019s leading EV battery maker with roughly 38 percent<\/a> market share, now stands squarely in this crossfire. The Pentagon recently labelled CATL<\/a> a \u201cChinese military company\u201d, underscoring how geopolitics is reshaping clean-energy supply chains as Washington walls off sensitive links while sustaining EV momentum. This brief, therefore, examines CATL\u2019s designation and its implications for the company\u2019s US expansion.<\/p>\n

US Dependence on Chinese Minerals<\/p>\n

China dominates<\/a> the midstream refining and processing, where prices, quality, and timelines are set, giving it leverage over the US. In batteries, China controls roughly 70\u201395 percent of global lithium, cobalt, phosphate, and graphite processing capacity, directly shaping availability and costs for battery-grade materials. This includes nearly 80 percent of LFP, two-thirds of nickel-based cathodes, and over 90 percent of graphite anodes, creating single-point sensitivity that turns policy shifts into project delays.<\/p>\n

<\/p>\n

In contrast, the US has limited domestic refining, leaving it heavily reliant on imported battery-grade lithium, graphite, and other critical inputs. To address this, new foreign entity of concern (FEOC) rules aim to reduce strategic exposure to Chinese supply chains.<\/p>\n

\n<\/p><\/blockquote>\n

Rare earths follow a similar pattern, with most refining concentrated in China, reinforcing systemic dependence across motors and advanced electronics. In contrast, the US has limited domestic refining, leaving it heavily reliant on imported battery-grade lithium, graphite, and other critical inputs. To address this, new foreign entity of concern (FEOC<\/a>) rules aim to reduce strategic exposure to Chinese supply chains.<\/p>\n

China has also begun using its dominance as leverage. Recent export licensing requirements on rare earths signalled Beijing\u2019s willingness to weaponise minerals, turning EV supply chains from an industrial challenge into a national security concern.<\/p>\n

The tables below outline China\u2019s recent policy actions and the extent of US dependence on these CRMs.<\/p>\n

Table 1: China\u2019s Export Control Timeline<\/strong><\/p>\n


\n <\/p>\n <\/p>\nDate<\/strong><\/td>\n

<\/p>\nPolicy\/Action <\/strong><\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nJuly<\/a> 2023<\/td>\n

<\/p>\nGallium and Germanium Export Controls by MOFCOM<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nOctober<\/a> 2023<\/td>\n

<\/p>\nExtension of Export Licensing to Graphite<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nDecember<\/a> 2024<\/td>\n

<\/p>\nExport Bans on Gallium, Germanium, Antimony<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nFebruary<\/a> 2025<\/td>\n

<\/p>\nExport License Requirement Added for Tungsten, Tellurium, etc.<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nApril<\/a> 2025<\/td>\n

<\/p>\nExport Restrictions on 7 Rare Earths & Related Magnets<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nMay<\/a> 2025<\/td>\n

<\/p>\nTemporary Suspension of Some Rare Earth Export Controls (90 days)<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nJuly<\/a> 2025<\/td>\n

<\/p>\nStricter Enforcement of Rare Earth Export Licensing<\/td>\n


\n<\/tr>\n


\n <\/p>\n

Source: <\/strong>Author\u2019s compilation using various sources<\/p>\n

Table 2: US Critical Mineral Import Reliance<\/strong><\/p>\n


\n <\/p>\n <\/p>\nCritical Mineral<\/strong><\/td>\n

<\/p>\nNet Import Reliance (2024)<\/strong><\/td>\n

<\/p>\nLeading Import Sources (2020-2023)<\/strong><\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nGallium<\/td>\n

<\/p>\n100 percent<\/td>\n

<\/p>\nJapan, China, Germany, Canada<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nGraphite (natural)<\/td>\n

<\/p>\n100 percent<\/td>\n

<\/p>\nChina, Canada, Mexico, Mozambique<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nAntimony<\/td>\n

<\/p>\n85 percent<\/td>\n

<\/p>\nChina, Belgium, India, Bolivia<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nRare Earths<\/td>\n

<\/p>\n80 percent<\/td>\n

<\/p>\nChina, Malaysia, Japan, Estonia<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nCobalt<\/td>\n

<\/p>\nOver 75 percent<\/td>\n

<\/p>\nNorway, Finland, Japan, Canada<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nGermanium<\/td>\n

<\/p>\nOver 50 percent<\/td>\n

<\/p>\nBelgium, Canada, China, Germany<\/td>\n


\n<\/tr>\n

<\/p>\n <\/p>\nLithium<\/td>\n

<\/p>\nOver 50 percent<\/td>\n

<\/p>\nChile, Argentina<\/td>\n


\n<\/tr>\n


\n <\/p>\n

Source: <\/strong>Author\u2019s compilation using the USGS<\/a> Mineral Commodity Summaries 2025<\/p>\n

CATL\u2019s Position and US Listing<\/p>\n

CATL has expanded<\/a> rapidly across Europe and Asia, supplying major automakers and building large-scale projects in Germany, Hungary, and Indonesia to diversify its market base.<\/p>\n

<\/p>\n

The US Department of Defense (now renamed the Department of War) added CATL to its list of \u201cChinese military companies,\u201d citing concerns over China\u2019s military-civil fusion strategy. CATL dismissed the designation as \u201cmistaken\u201d and politically motivated.<\/p>\n

\n<\/p><\/blockquote>\n

However, on 7 January 2025, <\/strong>the US Department of Defense (now renamed the Department of War) added CATL<\/a> to its list of \u201cChinese military companies<\/a>,\u201d citing concerns over China\u2019s military-civil fusion strategy. CATL dismissed the designation as \u201cmistaken<\/a>\u201d and politically motivated.<\/p>\n

While the label does not impose a flat ban, it acts as a strong deterrent. It limits<\/a> defence procurement, triggers heightened scrutiny by the Committee on Foreign Investment in the United States (CFIUS), and discourages US automakers from deepening partnerships. Political backlash is already visible, as Virginia withdrew<\/a> support for a planned Ford\u2013CATL battery plant in 2023 after national-security concerns mounted, signalling the headwinds CATL faces in the US.<\/p>\n

Impact on US Market Entry<\/p>\n

The designation has made direct ownership of US facilities politically untenable. CATL is now limited to arm\u2019s-length licensing deals, such as the Ford Michigan LFP plant, where Ford owns the facility while CATL supplies the technology, equipment, and know-how. This structure avoids triggering FEOC rules and preserves tax credit eligibility by keeping governance and supply chains separated.<\/p>\n

However, these arrangements still face high compliance checks<\/a>, political pushback, and constant reputational scrutiny, which slows timelines and raises costs. Consequently, CATL is likely to prioritise Europe, Southeast Asia, or even Canada<\/a> and South America<\/a> for new capacity, supplying the US indirectly while sidestepping its volatile regulatory environment.<\/p>\n

<\/p>\n

CATL is now limited to arm\u2019s-length licensing deals, such as the Ford Michigan LFP plant, where Ford owns the facility while CATL supplies the technology, equipment, and know-how.<\/p>\n

\n<\/p><\/blockquote>\n

FEOC Rule as the Choke Point<\/p>\n

FEOC<\/a> status is triggered when a covered nation holds 25 percent or more of board seats, voting rights, equity, or effective control through licenses or contracts. These rules form the strongest barrier to Chinese involvement in US clean energy supply chains.<\/p>\n

Starting in 2024, EV tax credits are denied for vehicles containing battery components from Chinese-controlled entities. In 2025, the restriction expands to critical minerals such as lithium and graphite.<\/p>\n

For US automakers, this means proving that no part of their supply chain is under FEOC control to claim tax credits and pass Department of Energy and\u00a0 Internal Revenue Service review, a daunting task given China\u2019s dominance in midstream processing.<\/p>\n

Licensing models like Ford\u2019s can technically proceed: they must be governed by strict legal and operational separation, making every CATL-linked project costly, complex, and politically sensitive.<\/p>\n

Strategic Path Forward<\/p>\n

CATL\u2019s listing does not ban the company outright, but limits it to indirect engagement rather than direct ownership of US plants. Its strategy now centres on licensing technology and manufacturing intellectual property (IP), expanding in lower-risk regions like Europe and Southeast Asia, and tightening control over upstream lithium and graphite supplies to maintain pricing power.<\/p>\n

The US strategy, in turn, hinges on scaling domestic refining to reduce dependence on Chinese inputs and building friend-shored supply chains with allies like Canada and Australia. FEOC rules remain central to enforcing clean governance separation while keeping EVs affordable.<\/p>\n

Without rapid midstream development in North America, these policies will slow China\u2019s influence but fall short of delivering true supply chain independence.<\/p>\n

Manini<\/strong> is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation.<\/p>\n

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here <\/a> to access our curated content \u2014 blogs, longforms and interviews. <\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"Image Source: Getty Images This is the 182nd\u00a0in the \u2018China Chronicles\u2019 series. Washington\u2019s new \u201cforeign entity of concern\u201d…\n","protected":false},"author":2,"featured_media":473632,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[49,978,659],"class_list":{"0":"post-473631","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-united-states","9":"tag-us","10":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115316121237972116","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/473631","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=473631"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/473631\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/473632"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=473631"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=473631"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=473631"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}