China has introduced new export restrictions requiring licenses for overseas transfer of battery manufacturing technologies, impacting Chinese EV companies' ability to establish factories abroad.

These restrictions, announced in January 2025, aim to protect national economic security and are part of a broader effort to control critical green tech supply chains amid rising geopolitical tensions.

The regulations focus on technologies involved in producing intermediate substances for battery cathodes, including lithium iron phosphate (LFP) and lithium manganese iron phosphate (LMFP), and narrow the scope to specific extraction methods like ion exchange and resin techniques.

While the immediate impact on Chinese EV makers like BYD and CATL may be limited, as they primarily focus on assembly and cell production, the long-term risks could be significant if export licenses become more restrictive.

These controls follow similar restrictions on rare earth elements, reflecting China's strategic move to maintain dominance in critical materials for EVs, consumer electronics, and military applications.

The restrictions are part of China's ongoing efforts to strengthen its position in the global supply chain, especially as Western countries like the US and EU seek to localize production to reduce dependence on Chinese technology.

China currently holds 67% of the global EV battery market and 94% of LFP battery capacity, solidifying its leadership in affordable EV technology.

Major Chinese battery manufacturers such as CATL and BYD continue expanding internationally, with CATL operating facilities in Germany and Hungary and plans for a joint venture in Spain.

Despite export restrictions, Chinese companies are expanding their manufacturing footprint overseas, which could influence global EV markets and supply chains.

Western automakers are expected to accelerate domestic battery production and reduce reliance on Chinese supply chains in response to these export controls, potentially reshaping the global EV industry.

Analysts suggest these restrictions may deepen geopolitical decoupling, prompting the US and EU to further localize their battery material and processing capabilities.

While immediate disruptions may be limited, the long-term effects could include increased geopolitical tensions and a more fragmented global supply chain for EV batteries.

In contrast to China's cautious stance, the US has seen proposals for Chinese electric vehicle battery factories in Michigan, indicating ongoing interest in Chinese investment despite rising tensions.