The United States is engaged in a complex and uphill battle to establish a resilient domestic battery supply chain, aiming to diminish its critical reliance on China. Despite concerted efforts from successive administrations, the funding allocated and the policy landscape in Washington appear dwarfed by the immense scale of China’s entrenched global leadership, according to a consensus among industry analysts and executives. China’s strategic investments over decades have forged an unparalleled integrated ecosystem, spanning from raw material extraction and refining to advanced component manufacturing and finished electric vehicles (EVs) and energy storage systems. This formidable lead poses a significant challenge to U.S. ambitions for industrial independence and national security in the burgeoning green energy sector.
The Global Battery Landscape: China’s Unrivaled Dominance
China’s ascendancy in the battery sector is not merely a matter of market share; it represents a comprehensive strategic advantage across virtually every segment of the supply chain. From the sourcing of critical minerals to the production of high-tech battery cells, Beijing has meticulously cultivated an ecosystem that global competitors find exceedingly difficult to replicate. The International Energy Agency (IEA) reports that China controls a majority of the global share in several key areas. For instance, while it is a significant supplier of raw critical minerals like graphite, its true leverage lies in the refining and processing stages. Since 2020, China’s share of mineral refining has seen substantial growth, solidifying its position as the indispensable hub for transforming raw materials into usable battery components. This refining prowess extends to 95% of spodumene processing, a crucial step for extracting lithium from hard rock mines, as highlighted by Raef Sully, CEO of Lilac Solutions.
Further downstream, China’s dominance becomes even more pronounced. The IEA indicates that China produces approximately 85% of the world’s EV battery cathode active material and over 90% of anode active material. These are foundational components for battery performance and longevity. This manufacturing capacity culminates in China making 80% of the world’s battery cells – the individual power units that constitute larger battery packs. Companies like Contemporary Amperex Technology Co. Limited (CATL), based in China, exemplify this scale. As the world’s largest EV and energy storage battery manufacturer, CATL has achieved an incredible lead in both technology and manufacturing capabilities, operating at a scale that allows for significant profitability due to their highly optimized supply chain and production efficiencies. This vertically integrated structure, buttressed by robust state support and long-term strategic planning, has enabled China to dictate terms in the global battery market.
U.S. Policy Shifts and Funding Initiatives Under Scrutiny
The United States has recognized the strategic imperative of bolstering its domestic battery supply chain, particularly in the face of China’s "chokehold" on critical materials and processing. The Biden administration, through the bipartisan Infrastructure Investment and Jobs Act (IIJA), enacted in 2021, initiated a substantial push to secure critical minerals and other materials. The IIJA created two $3 billion Department of Energy (DOE) programs specifically aimed at battery technology and materials, reflecting a high priority placed on boosting the U.S. battery supply chain. These programs were designed to foster domestic mining, processing, manufacturing, and recycling capabilities, alongside robust support for electric vehicle adoption, which is the primary driver of battery demand.
However, the policy landscape has undergone significant shifts with the transition to the Trump administration. While the administration has continued efforts to build up the U.S. battery supply chain, the approach has diverged considerably from its predecessor. In August of the current year, the Department of Energy awarded $500 million to seven companies involved in battery minerals, materials, manufacturing, or recycling. This funding represents the first tranche from the aforementioned IIJA programs, a testament to the bipartisan origin of the legislative framework. Yet, the overall policy direction under the Trump administration has seen the cancellation of many Biden-era policies that explicitly supported battery manufacturing and provided direct funding for electric vehicles. This includes the termination of federal tax credits for EVs and other related incentives, a move that analysts suggest signals a deceleration in the U.S.’s embrace of EV technology.
Richard Wang, CEO of Voya Energy, a battery technology company, observed, "A lot of those policies have reversed themselves under the Trump administration and/or shifted." This policy pivot has tangible consequences. Since January 2025, when the Trump administration took office, nearly $24 billion in announced battery projects have been canceled, according to data from Atlas Public Policy, a respected think tank tracking clean energy investments. This stark contrast in policy direction and the resulting cancellations underscore the volatile and unpredictable environment for long-term strategic investments in the U.S. battery sector. Analysts argue that while the $500 million in awards is a positive step, it pales in comparison to the scale of investment required to genuinely challenge China’s dominance, which is estimated to be in the tens, if not hundreds, of billions of dollars over decades.
Challenges and Strategic Bottlenecks: Refining and Midstream Processing
The core of China’s strategic advantage lies not just in raw material acquisition but critically in its sophisticated refining and processing capabilities. This industrial capacity allows China to transform raw minerals into battery-grade materials, a complex and energy-intensive process. The country’s expanded export controls in 2025 on rare earths and other minerals, along with processing equipment, served as a potent demonstration of this leverage, sending ripples of concern through global supply chains. These controls highlighted the vulnerability of nations dependent on China for essential inputs.
The U.S. funding recipients are strategically targeting these very bottlenecks. Coreshell Technologies, which received $50 million from the DOE, is developing battery anodes from domestically sourced silicon, offering an alternative to Chinese-sourced graphite. This innovation aims to circumvent a key area of Chinese control. Similarly, Lilac Solutions, awarded $100 million, is pioneering a method for extracting lithium directly from saltwater brine. This technology bypasses the traditional and often environmentally intensive hard rock mining followed by processing, 95% of which is controlled by China. Raef Sully of Lilac Solutions emphasized the significance of this approach: "If you use our technology, you’re producing battery grade lithium carbonate or hydroxide at the site of production. And you’re bypassing that important step, that processing step that China has a chokehold on today."
The IEA has repeatedly warned that the lack of investment in these critical midstream stages – such as cathode and anode active material production – in countries like the U.S. "poses a growing risk to global supply security." Building out these capabilities requires not only capital but also specialized expertise, advanced infrastructure, and a skilled workforce, elements that China has systematically developed over decades. Tu Le, founder and managing director of Sino Auto Insights, cautioned, "It takes decades and tens, if not hundreds of billions of dollars to achieve the kind of comprehensive scale across the supply chain that China now has. We don’t have decades. We have five, six, seven years to try to become competitive." This urgency underscores the monumental task facing the United States.
Pioneering U.S. Innovations and the Road to Mass Production
Despite the overarching challenges, the U.S. remains a hotbed of innovation in battery technology. Companies like Coreshell Technologies and Lilac Solutions represent the cutting edge of American ingenuity, developing novel approaches to material sourcing and component manufacturing that could potentially disrupt China’s established dominance. Coreshell’s focus on silicon anodes is particularly noteworthy, as silicon offers a higher energy density than traditional graphite, promising lighter and more powerful batteries. By leveraging domestically available silicon, Coreshell aims to create a more secure and localized anode supply chain, reducing reliance on foreign imports and the geopolitical risks associated with them.
Lilac Solutions’ brine-based lithium extraction technology addresses another critical vulnerability. Traditional hard rock mining and subsequent processing are not only concentrated in China but also carry significant environmental footprints. Brine extraction, if scaled efficiently, could offer a more sustainable and localized source of lithium, directly producing battery-grade material at the point of extraction. This innovation could fundamentally alter the global lithium supply chain dynamics, making it more resilient and less susceptible to geopolitical pressures.
However, the journey from innovative prototype to mass production is fraught with significant hurdles. As Tu Le points out, "We have a ton of innovation coming out of the United States. These small fledgling companies are super innovative, but getting and building prototypes of what they’re trying to sell is one thing. Being able to mass produce them at a high quality level, repeatably in the millions of units is another thing entirely." This transition requires massive capital investment, robust manufacturing infrastructure, supply chain integration, and a highly skilled workforce—areas where China currently holds a significant competitive advantage. The ability of these nascent U.S. companies to scale their operations efficiently and competitively will be a decisive factor in the success of the broader effort to re-shore the battery supply chain.
The EV Market Dynamics: A Tale of Two Economies
The divergence in battery supply chain development is inextricably linked to the contrasting trajectories of the electric vehicle market in China and the U.S. China has made the scaling of EVs a national priority, intertwining it with its industrial policy and environmental goals. This strategic focus has led to an explosive growth in EV adoption within the country and a corresponding surge in its EV exports. In July, "new energy vehicles," encompassing hybrids, EVs, and extended-range EVs, constituted a staggering 65% of China’s new car sales, according to the China Passenger Car Association. The total new car sales volume in China in 2025 was 23.7 million units, demonstrating the immense scale of its automotive market.
In stark contrast, the U.S. has not witnessed the same level of market penetration or policy consistency. In the second quarter of 2026, EVs, hybrids, and plug-ins accounted for approximately 24% of sales in the U.S., according to the Energy Information Administration. The U.S.’s total new car sales volume in 2025 was about 16.3 million, significantly less than China’s. The Trump administration’s decision to end federal tax credits for EVs and other related funding has further complicated the growth trajectory of the U.S. EV market. These incentives had been crucial in stimulating consumer demand and offsetting the higher upfront costs of EVs. The withdrawal of such support creates uncertainty for both consumers and automakers, potentially slowing down the transition to electric mobility.
Voya Energy’s Richard Wang articulated the broader implications: "When you look at China, they are incredibly dominant in EVs at a time when the U.S. is slowing down its EV development. What this is really jeopardizing is the ability of U.S. automakers to compete globally, where China is taking the lion’s share of all the growth globally." This disparity extends beyond passenger vehicles to energy storage systems, where demand has been averaging 70% growth since 2022, according to the EIA. While EVs still account for over 70% of total lithium-ion battery deployment, the strategic importance of energy storage for grid stability and renewable energy integration cannot be overstated. China’s lead in battery manufacturing therefore grants it a significant advantage across multiple critical sectors.
Broader Impact and Implications: National Security and Economic Competitiveness
The implications of China’s dominance in the battery supply chain extend far beyond economic competition; they touch upon national security, geopolitical influence, and the future of global technology leadership. A lack of domestic battery production capabilities leaves the U.S. vulnerable to supply disruptions, price volatility, and potential economic coercion from Beijing. The 2025 export controls imposed by China served as a stark reminder of this leverage, demonstrating how critical mineral supply can be weaponized in international relations. Building a resilient domestic supply chain is thus not merely an economic endeavor but a strategic imperative to safeguard American interests.
Furthermore, the battery sector is foundational to the broader clean energy transition. Without a robust domestic supply of batteries, the U.S.’s ambitions for renewable energy deployment, grid modernization, and the electrification of its transportation sector could be severely hampered. This dependency could slow down climate action and compromise the nation’s ability to meet its environmental targets. The economic impact is also significant. The battery industry creates high-skilled jobs, fosters technological innovation, and drives economic growth. Ceding leadership in this sector could mean relinquishing future economic opportunities and allowing other nations to define the technological standards of tomorrow.
Despite the daunting scale of the challenge and the policy inconsistencies, some industry leaders remain optimistic about the long-term prospects for the U.S. Raef Sully of Lilac Solutions believes that even with China’s substantial lead, the U.S. must begin somewhere. He envisions that over the next decade, the U.S. could see a significant increase in domestic lithium, cathode material, and battery cell production. "So early days, but a step in the right direction," he concluded. This perspective underscores the notion that while the path is arduous and requires sustained, strategic investment, the initial steps being taken are crucial for laying the groundwork for a more self-reliant and competitive American battery industry. The journey will demand not only technological innovation but also consistent policy support, substantial capital infusion, and a unified national vision to overcome decades of entrenched foreign dominance.
