America’s EV industry faces policy uncertainty, supply chain weaknesses, and Chinese competition that threaten domestic battery production and long-term economic competitiveness. 

Advanced batteries have become key building blocks of the 21^st-century economy. They are now deployed in drones, data centers, consumer electronics, the energy grid, and of course, electric vehicles (EVs).  

As we emphasized in our first piece, it is this last category—EVs—that are responsible for the majority of demand for advanced batteries. If the United States wants to have viable domestic manufacturing of advanced batteries, it needs a thriving EV sector; it’s that simple.  

Unfortunately, there are still an array of economic, technical, and political obstacles to scaling EV production in America and achieving the many downstream benefits it would provide for the US job market and the country’s economic competitiveness. We lay out those challenges in this piece. Our third and final piece in this series will outline the most efficient, politically viable policy measures that will likely be needed to overcome them.  

The Uncertain Economics of the American EV Market

For more than a century, the American auto industry excelled at designing, manufacturing, and marketing vehicles powered by the internal combustion engine. Unfortunately for Detroit, and America writ large, the traditional engine is now being replaced by batteries, electronics, and software. The challenges to building a competitive vehicle are now defined by chemistry, computing, and supply chains—all areas where America enters the competition with significant disadvantages vis-à-vis China.  

An EV’s battery alone accounts for 30 to 40 percent of its total cost. Producing those batteries requires a complex set of supply chains, stretching from lithium mines and nickel refineries to cathode and anode materials, separators, electrolytes, and precision manufacturing equipment. China spent two decades building that ecosystem while the United States dithered. 

During the Biden administration, Republicans and Democrats recognized the importance of de-risking battery and mineral supply chains and created economic incentives to encourage the private sector to do so. The CHIPS and Science Act, the Bipartisan Infrastructure Law (BIL), and the Inflation Reduction Act (IRA) measures were all intended to reduce reliance on China through on-shoring and ally-shoring of manufacturing and supply chains in key areas, including batteries and electric vehicles. 

However, the Trump administration and its allies in Congress turned their back on these policies, scrambling the economics of domestic EV production despite the fact that they would have yielded outsized benefits in Republican districts across the country.

The One Big Beautiful Bill Act (OBBBA) eliminated many of the clean energy incentives associated with the IRA. The phaseout of the 30D consumer incentives, which provided a $7,500 tax credit for buyers of new EVs built in the United States, removed a key driver of supply chain localization. The Trump administration’s decision to do away with penalties for non-compliance with Corporate Average Fuel Economy (CAFE) standards compounded matters. The result: US automakers retreated from electrification, and Detroit has now written down billions in losses resulting from Washington’s about-face on EV policy.  

With the loss of 30D tax credits and slowing EV demand, battery makers are pivoting from EV batteries to batteries for storage to support AI data centers and drone makers, but their demand volume is inadequate to compensate for the loss of EV demand, which constitutes 75 to 90 percent of demand for batteries. As a result, domestic battery demand is projected to fall by 25 percent in the United States in 2026.

The OBBBA did retain 45X advanced manufacturing tax credits, which continue to support battery manufacturers through 2034, but complex Foreign Entity of Concern (FEOC) rules (still not finalized!) make capturing them needlessly difficult for manufacturers.  

Critical Mineral Dependence and Lingering Technical Challenges

The Trump administration’s approach to issues related to electric vehicles, advanced batteries, and critical minerals has been schizophrenic. The administration is reflexively hostile to renewable energy and EVs—again, the biggest source of demand for domestic battery production—but seems to realize that advanced batteries are needed for AI data centers and military-related use cases. Fearing China will continue to use its dominance of critical minerals markets in the ongoing trade war, the administration has gone so far as to take direct equity stakes in certain mining firms. 

To be sure, some progress has been made, including efforts to establish a $12 billion Strategic Critical Minerals Reserve through a new initiative dubbed Project Vault. After antagonizing allies and partners for more than a year, the Trump administration also belatedly tried to organize them in a coalition through the Forum on Resource Geostrategic Engagement (FORGE)—a successor to the Minerals Security Partnership. 

However, despite these efforts, there’s no evidence to date that the White House has a comprehensive strategy for revitalizing US industry or reducing Western reliance on Chinese mineral processing, for batteries and much else.  

For now, China continues to dominate the world in the mining and processing of critical minerals and rare earth elements. Even when raw materials originate in Australia, Chile, or even the United States, they are generally shipped to China for refinement and potential re-export. Advanced battery production continues to rely on imported components, namely graphite, as well as mid-stream components such as anodes and cathodes, which are made from processed metals and enable electrochemical reactions in batteries. Nearly all anodes are produced from graphite, and cathodes are mostly made through a combination of lithium, nickel, and cobalt or lithium, iron, and phosphate (although battery makers continue to research other possible chemistries as well). 

In 2022, China was responsible for 100 percent of spherical graphite and 69 percent of synthetic graphite production globally. The United States produced no natural graphite between 2021 and 2025 and imported about 35 percent of its synthetic graphite annually. China is the main source of graphite imported to the United States, whether natural or synthetic.

Perhaps more important is that the United States has almost no mid-stream anode or cathode production capacity. Current forecasts suggest that only three to four percent of cathode and anode production will happen in North America by 2030, with China remaining responsible for about 80 to 90 percent of the global market.

American battery makers and car companies are also at a disadvantage because Chinese companies have pivoted to newer, cheaper, safer battery chemistries made with lithium iron phosphate (LFP). LFP batteries are less energy dense than traditional nickel/magnesium/cobalt batteries, and historically they had less range. However, new Chinese battery designs have enhanced the range of LFP batteries as well. 

Though some US-based firms are now jumping into LFP production, American firms have not mastered advanced LFP production techniques. As a result, Ford entered into a licensing agreement with CATL in 2023 to make LFP batteries in Michigan despite the potential for political blowback. 

Battery technologies like LFP were invented in the United States, but China has perfected their manufacturing and commercialization. Thanks to robust state support, China now has a dense network of suppliers that can respond to customer needs quickly and at low cost. The LFP example underscores how China has gained ground as the leading developer and manufacturer of new technologies in the clean energy, automotive, and battery spaces, as reflected in surging patent applications across a range of technologies. 

Some energy analysts have advocated that the United States should respond to these dynamics by attempting to leapfrog Chinese capabilities through research and development of pathbreaking battery chemistries, like solid-state and sodium-ion batteries. However, Chinese firms and the government are also actively supporting research and development and deployment of alternative battery chemistries. 

A Chinese government-led project began investing $830 million to support six firms in developing solid-state batteries in 2024. US companies like SES AI, Amprius, and Unigrid are likewise experimenting in this space, but they still tend to partner with Chinese battery companies to scale manufacturing, taking advantage of China’s slack production capacity. 

What Comes Next? Bringing Clarity to the Politics of EVs

China achieved its current market position in critical minerals, batteries, and EVs through decades of coordinated industrial capacity, infrastructure investment, and a willingness to tolerate periods of overcapacity that the private sector alone would eschew. 

By contrast, the United States has failed to plan beyond a given election cycle, and companies contemplating multi-billion-dollar investment decisions have been forced to guess which way the political winds may blow next.  

Moving forward, the United States must strive for policy predictability in this area if it is going to compete effectively with China. Otherwise, American manufacturers will continue to fail to achieve the production volumes needed to reduce costs, the higher prices that result will continue to discourage consumers, and limited demand will stymie further investment. Meanwhile, Chinese firms will continue to benefit from enormous—and growing—domestic demand and further gobble up emerging export markets, for EVs and energy storage solutions alike.  

The United States now finds itself the underdog in a contest over who will lead on advanced manufacturing over the next half-century. To retain these industries, which center around advanced batteries and their myriad applications, the United States needs to arrive at a bipartisan consensus that will restore demand for electric vehicles. The object of these policies would not solely or even primarily be to reduce emissions, however laudable that would be, but to revitalize American industry and ensure US economic competitiveness over the decades ahead.  

How to achieve these ambitions will be the subject of our next, and final, article in this series. Stay tuned!

About the Authors: Greg Pollock and Joshua Busby

Greg Pollock is an adjunct professor at Georgetown University’s School of Foreign Service and a non-resident senior fellow at the Center for Climate and Security. He previously taught at the National War College and served from 2010 to 2025 in a series of leadership positions in the Office of the US Secretary of Defense, including twice serving as an acting Deputy Assistant Secretary of Defense.

Joshua Busby is a professor at the LBJ School of Public Affairs at the University of Texas at Austin. From 2021 to 2023, he served as a senior climate advisor at the US Department of Defense. He writes on the intersection of climate, energy, and geopolitics. His book States and Nature: The Effects of Climate Change on Security won the 2026 Grawemeyer Award for Ideas Advancing World Order.

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