In recent months, automakers around the world have faced an unsettling reality: the global automotive supply chain runs through Beijing. From the rare earth magnets that power electric vehicle (EV) motors to the lithium, cobalt, and graphite that feed battery factories, China exerts unprecedented control over the materials that modern vehicles require. As trade tensions with Western nations have escalated, Beijing has moved swiftly to leverage this dominance, imposing export restrictions and licensing requirements that threaten production lines from Detroit to Munich.
Export Licensing for Rare Earth Magnets
In April 2025, China added rare earth magnets to its export control list, requiring manufacturers of electric motor components—integral to EVs—to obtain licenses from the Ministry of Commerce before shipping abroad. These magnets, which incorporate elements such as neodymium, dysprosium, and terbium, are essential for high-efficiency, lightweight motors in everything from hybrids to full-electric cars. Because China processes and refines over 90 percent of the world’s rare earth oxides and fabricates nearly 80 percent of finished magnet assemblies, it effectively controls the lifeblood of the EV supply chain.
Under the new rules, exporters must submit detailed technical dossiers, including product specifications, production facility photos, and evidence of end-use applications. The licensing body, originally staffed with fewer than 60 officials, now grapples with thousands of applications from European, North American, and Asian automakers—ranging from BMW and Volkswagen to Tesla and Toyota. Approval rates have hovered at around 25 percent, and many companies report waiting more than two months for sign-off. For automakers eyeing summer production ramps, these delays have translated into temporary plant shutdowns and postponed vehicle deliveries.
Battery Materials: Lithium, Cobalt, and Graphite
Beyond magnets, China holds near-monopolies deeper in the supply chain. It accounts for roughly two-thirds of global lithium processing capacity, over 90 percent of cobalt refinement, and more than 80 percent of graphite production. These three raw materials serve as the foundation for lithium-ion batteries that power EVs, plug-in hybrids, and even mild-hybrid models. Over the past year, Beijing has debated extending export licensing requirements to certain battery-grade materials and processing technologies—moves that could further tighten Chinese grip on global battery output.
Chinese state-owned enterprises have consolidated mining and processing in regions such as Inner Mongolia, Sichuan, and Tibet, ensuring secure domestic supply. Downstream, Chinese battery giants such as CATL, BYD, and Gotion dominate cell manufacturing; together they produce more than 70 percent of the world’s EV battery cells. Because these firms integrate both raw-material sourcing and cell production under one roof, they are insulated from foreign supply disruptions. In contrast, Western battery pack assemblers frequently rely on Chinese-sourced cathode precursors and anode materials, forcing them to negotiate continuously with Beijing’s suppliers.
In early May 2025, the Ministry of Commerce circulated draft regulations proposing export limits on certain lithium hydroxide grades and high-purity graphite under the guise of “national security” and “environmental protection.” Although these proposals remain under review, they have already spurred panic buying by non-Chinese refiners seeking to lock in short-term supply. Automakers such as Ford and General Motors have publicly warned that a sudden cut-off of battery-grade feedstocks would lead to line stoppages by late summer, affecting tens of thousands of workers across North America and Europe.
Semiconductor Dependencies in Cars
Automobiles today are also computers on wheels. Each modern vehicle contains as many as 100 semiconductors, powering everything from infotainment screens and advanced driver-assistance systems (ADAS) to engine control units and powertrain inverters. While automotive-grade microcontrollers are often designed by Western or Japanese firms, China has invested heavily in domestic semiconductor fabs and packaging operations over the past decade. As of 2025, Chinese foundries produced nearly 40 percent of the world’s mature-node chips—used extensively in sensors, power management ICs, and microcontrollers critical to the automotive industry.
When global chip shortages first emerged in 2020, automakers struggled to meet production targets; factories closed temporarily and pushed back launches. In response, governments encouraged onshoring and recycling, but progress has been slow. Today, China’s control over chip packaging, testing, and even assembly gives it leverage when bilateral tensions flare. Although Beijing has not formally restricted automotive chip exports on par with rare earths, informal slowdowns—such as extended quality inspections—have become increasingly common. Executives from European Tier-1 suppliers note that shipments of automotive-grade microcontrollers and power modules often face “unexplained” delays at customs, adding weeks to the procurement cycle.
China’s advantage lies not only in raw materials and components but also in the seamless integration of its domestic supply chains. In regions like Jiangsu, Zhejiang, and Guangdong provinces, clusters of battery plants, automation centers, and auto assembly facilities operate in proximity. This synergy enables rapid iteration, cost efficiencies, and just-in-time deliveries. European and American automakers that once tried to replicate this “ecosystem” at home have struggled to match the scale and speed that Chinese industrial parks deliver.
For example, a Western battery manufacturer that procures cobalt sulfate from the Democratic Republic of Congo must ship it to China for refining, then wait for the finished cathode material to arrive back, often in less than optimal container loads. By contrast, Chinese battery makers extract cobalt concentrates domestically or import from Africa and immediately process them in local refineries before moving to cell factories just a few hours away. This localized, end-to-end flow minimizes freight costs, reduces inventory risk, and—critically—shields Chinese producers from Western sanctions or tariffs that might inhibit trade.
To foster further integration, Beijing offers generous subsidies for EV production, R\&D tax incentives for battery innovation, and low-interest loans for suppliers of critical components. Domestic automakers like SAIC, Geely, and Great Wall Motors receive direct central government backing to develop EV platforms, ensuring that Chinese vehicle brands can compete on price and technology with established global players. Foreign joint ventures—once a path for technology transfer—have become less attractive as Beijing tightens data sharing and local content mandates.
Geopolitical Leverage and Trade Tensions
China’s broad-based dominance in automotive inputs has become a tool of statecraft. When the United States imposed tariffs on Chinese-made auto parts and solar panels in late 2024, Beijing responded by quietly slowing approvals for rare earth magnets and announcing potential restrictions on battery precursor exports. Although Chinese officials publicly insist that controls apply equally to all buyers, Western trade associations argue that the timing and speed of reviews favor Asian customers while U.S. and European firms face prolonged waits. This dual-use narrative—portraying high-performance magnets and battery electrolytes as potential military technologies—allows Beijing to frame export restraints as “non-discriminatory” even as foreign automakers perceive bias.
In May 2025, high-level discussions between the U.S. and China in Geneva hit an impasse when American negotiators accused Beijing of using rare earth export delays to undermine the tentative trade truce. Chinese delegates countered by emphasizing national security concerns and pointing to U.S. restrictions on semiconductor technology exports. The impasse underscores how intertwined supply chains have become with geopolitical strategies, heightening the risk that any new flare-up—whether over Taiwan, the South China Sea, or industrial policy—could trigger further curbs on automotive inputs.
The immediate impact of China’s supply chain controls manifests in production curtailments and cost spikes. In May 2025, Ford idled its Kentucky SUV plant for three weeks, citing magnet shortages that disrupted motor assembly for hybrid models. European component makers such as Bosch and Mahle reported order backlogs stretching into Q4, as licensing uncertainty forced them to redirect orders to more expensive secondary suppliers. Suppliers of sensors, alternators, and electric traction inverters have been forced to reduce production forecasts by as much as 20 percent this quarter.
Automotive executives describe a sense of “supply chain déjà vu,” recalling the 2010–2011 rare earth crisis when China temporarily halted exports to Japan over a territorial dispute. That episode triggered a global scramble for alternatives but ultimately reinforced China’s demotion of upstream capacity to foreign partners. While governments from Canberra to Ottawa have since announced critical mineral strategies, new mines and processing plants require years of permitting and capital, and still often depend on Chinese refining for final output. In the meantime, factories in the U.S. and Europe face the prospect of paring back EV rollouts as battery materials become more expensive and less certain.
Challenges in Diversification Efforts
In response to Chinese dominance, the U.S. and Europe have launched parallel initiatives to diversify supply chains. Washington’s IRA (Inflation Reduction Act) offers production tax credits for EVs assembled with North American battery cells; the European Union’s Critical Raw Materials Act sets quotas for local sourcing of key minerals. But shifting supply chains is neither quick nor straightforward. New lithium projects in Australia and Canada can produce spodumene concentrates, yet lack domestic facilities to convert them into battery-grade lithium carbonate or hydroxide without sending shipments to Chinese refiners that hold 70 percent of global capacity. Similar challenges afflict cobalt: even if mines in Africa operate under Western consortiums, most cobalt feedstock still passes through Chinese chemical plants to achieve automotive-grade purity.
Alternative rare earth suppliers—such as the proposed mine in Nebraska—face their own hurdles. Refining rare earth oxides requires specialized equipment and high-temperature separation processes that only a handful of non-Chinese facilities can match. While Australia’s Lynas Rare Earths is building a processing plant in Texas, it will not reach full capacity until late 2026, and early production is earmarked primarily for military-grade materials. As a result, Western automakers remain tethered to Chinese-sourced rare earth alloys for their neodymium-iron-boron (NdFeB) magnets and must navigate Beijing’s licensing regime for any urgent requirements.
China’s influence extends beyond magnets and batteries. Vehicle electronics—instrument clusters, ADAS cameras, radar modules, and infotainment chips—often contain gallium, germanium, and silicon carbide components. In December 2024, Beijing imposed an export ban on gallium and germanium to select Western countries, citing concerns over “sensitive technology transfer.” Although non-Chinese suppliers have begun exploring alternative sources in Europe and North America, capacities remain limited at scale. This constraint endangers not only sensor modules but also high-voltage power electronics that rely on silicon carbide semiconductors, for which Chinese firms control about 60 percent of global production.
Sensors for autonomous driving—lidar units, radar transceivers, and machine-vision processors—are likewise affected. Many of the advanced imaging chips come from fabs in East Asia, which depend on Chinese-manufactured photoresists and etching gases. When Beijing threatened in early 2025 to restrict certain semiconductor-grade chemicals, manufacturers from Europe to South Korea scrambled to secure stockpiles; yet without alternate suppliers, any prolonged cutoff could hamper the rollout of Level 2+ and Level 3 autonomous systems, delaying planned launches by global OEMs.
Domestic Policy Responses and Future Outlook
Facing intensifying pressure, several governments have stepped up investment in domestic mineral and battery processing. The U.S. Department of Energy has announced $3.5 billion in grants for battery recycling and processing facilities, aiming to recover lithium, nickel, and cobalt from spent EV packs by 2026. The European Commission has earmarked €5 billion for clean-tech manufacturing clusters, focusing on expanding refining capacity in Sweden and France. However, even with these efforts, experts warn that breaking China’s chokehold will take years, if not decades.
Meanwhile, Beijing continues to deepen its grip. In May 2025, state-owned enterprises merged two of China’s largest rare earth processors into a single national champion, streamlining decision-making and reinforcing export licensing authority. At the same time, subsidies for domestic EV production and an expanding network of charging infrastructure ensure that growth in China’s own auto market remains insulated from foreign supply disruptions. Although Chinese automakers face slower growth than a year ago, they still account for nearly half of global EV sales, underpinned by robust in-country supply of magnets, cells, and chips.
As the auto industry accelerates its shift toward electrification and autonomy, the materials and components that once seemed abundant will become battlegrounds of geopolitical competition. For global automakers, reliance on China’s supply chain is no longer optional—it is the reality. Until alternative sources scale at pace, Beijing’s licensing offices and state-run conglomerates will continue to determine who gets the magnets, batteries, and chips needed to keep assembly lines humming. In this new era, control of raw materials and semiconductors may prove as critical to the future of mobility as the vehicles themselves.
(Source:www.marketscreener.com)
Export Licensing for Rare Earth Magnets
In April 2025, China added rare earth magnets to its export control list, requiring manufacturers of electric motor components—integral to EVs—to obtain licenses from the Ministry of Commerce before shipping abroad. These magnets, which incorporate elements such as neodymium, dysprosium, and terbium, are essential for high-efficiency, lightweight motors in everything from hybrids to full-electric cars. Because China processes and refines over 90 percent of the world’s rare earth oxides and fabricates nearly 80 percent of finished magnet assemblies, it effectively controls the lifeblood of the EV supply chain.
Under the new rules, exporters must submit detailed technical dossiers, including product specifications, production facility photos, and evidence of end-use applications. The licensing body, originally staffed with fewer than 60 officials, now grapples with thousands of applications from European, North American, and Asian automakers—ranging from BMW and Volkswagen to Tesla and Toyota. Approval rates have hovered at around 25 percent, and many companies report waiting more than two months for sign-off. For automakers eyeing summer production ramps, these delays have translated into temporary plant shutdowns and postponed vehicle deliveries.
Battery Materials: Lithium, Cobalt, and Graphite
Beyond magnets, China holds near-monopolies deeper in the supply chain. It accounts for roughly two-thirds of global lithium processing capacity, over 90 percent of cobalt refinement, and more than 80 percent of graphite production. These three raw materials serve as the foundation for lithium-ion batteries that power EVs, plug-in hybrids, and even mild-hybrid models. Over the past year, Beijing has debated extending export licensing requirements to certain battery-grade materials and processing technologies—moves that could further tighten Chinese grip on global battery output.
Chinese state-owned enterprises have consolidated mining and processing in regions such as Inner Mongolia, Sichuan, and Tibet, ensuring secure domestic supply. Downstream, Chinese battery giants such as CATL, BYD, and Gotion dominate cell manufacturing; together they produce more than 70 percent of the world’s EV battery cells. Because these firms integrate both raw-material sourcing and cell production under one roof, they are insulated from foreign supply disruptions. In contrast, Western battery pack assemblers frequently rely on Chinese-sourced cathode precursors and anode materials, forcing them to negotiate continuously with Beijing’s suppliers.
In early May 2025, the Ministry of Commerce circulated draft regulations proposing export limits on certain lithium hydroxide grades and high-purity graphite under the guise of “national security” and “environmental protection.” Although these proposals remain under review, they have already spurred panic buying by non-Chinese refiners seeking to lock in short-term supply. Automakers such as Ford and General Motors have publicly warned that a sudden cut-off of battery-grade feedstocks would lead to line stoppages by late summer, affecting tens of thousands of workers across North America and Europe.
Semiconductor Dependencies in Cars
Automobiles today are also computers on wheels. Each modern vehicle contains as many as 100 semiconductors, powering everything from infotainment screens and advanced driver-assistance systems (ADAS) to engine control units and powertrain inverters. While automotive-grade microcontrollers are often designed by Western or Japanese firms, China has invested heavily in domestic semiconductor fabs and packaging operations over the past decade. As of 2025, Chinese foundries produced nearly 40 percent of the world’s mature-node chips—used extensively in sensors, power management ICs, and microcontrollers critical to the automotive industry.
When global chip shortages first emerged in 2020, automakers struggled to meet production targets; factories closed temporarily and pushed back launches. In response, governments encouraged onshoring and recycling, but progress has been slow. Today, China’s control over chip packaging, testing, and even assembly gives it leverage when bilateral tensions flare. Although Beijing has not formally restricted automotive chip exports on par with rare earths, informal slowdowns—such as extended quality inspections—have become increasingly common. Executives from European Tier-1 suppliers note that shipments of automotive-grade microcontrollers and power modules often face “unexplained” delays at customs, adding weeks to the procurement cycle.
China’s advantage lies not only in raw materials and components but also in the seamless integration of its domestic supply chains. In regions like Jiangsu, Zhejiang, and Guangdong provinces, clusters of battery plants, automation centers, and auto assembly facilities operate in proximity. This synergy enables rapid iteration, cost efficiencies, and just-in-time deliveries. European and American automakers that once tried to replicate this “ecosystem” at home have struggled to match the scale and speed that Chinese industrial parks deliver.
For example, a Western battery manufacturer that procures cobalt sulfate from the Democratic Republic of Congo must ship it to China for refining, then wait for the finished cathode material to arrive back, often in less than optimal container loads. By contrast, Chinese battery makers extract cobalt concentrates domestically or import from Africa and immediately process them in local refineries before moving to cell factories just a few hours away. This localized, end-to-end flow minimizes freight costs, reduces inventory risk, and—critically—shields Chinese producers from Western sanctions or tariffs that might inhibit trade.
To foster further integration, Beijing offers generous subsidies for EV production, R\&D tax incentives for battery innovation, and low-interest loans for suppliers of critical components. Domestic automakers like SAIC, Geely, and Great Wall Motors receive direct central government backing to develop EV platforms, ensuring that Chinese vehicle brands can compete on price and technology with established global players. Foreign joint ventures—once a path for technology transfer—have become less attractive as Beijing tightens data sharing and local content mandates.
Geopolitical Leverage and Trade Tensions
China’s broad-based dominance in automotive inputs has become a tool of statecraft. When the United States imposed tariffs on Chinese-made auto parts and solar panels in late 2024, Beijing responded by quietly slowing approvals for rare earth magnets and announcing potential restrictions on battery precursor exports. Although Chinese officials publicly insist that controls apply equally to all buyers, Western trade associations argue that the timing and speed of reviews favor Asian customers while U.S. and European firms face prolonged waits. This dual-use narrative—portraying high-performance magnets and battery electrolytes as potential military technologies—allows Beijing to frame export restraints as “non-discriminatory” even as foreign automakers perceive bias.
In May 2025, high-level discussions between the U.S. and China in Geneva hit an impasse when American negotiators accused Beijing of using rare earth export delays to undermine the tentative trade truce. Chinese delegates countered by emphasizing national security concerns and pointing to U.S. restrictions on semiconductor technology exports. The impasse underscores how intertwined supply chains have become with geopolitical strategies, heightening the risk that any new flare-up—whether over Taiwan, the South China Sea, or industrial policy—could trigger further curbs on automotive inputs.
The immediate impact of China’s supply chain controls manifests in production curtailments and cost spikes. In May 2025, Ford idled its Kentucky SUV plant for three weeks, citing magnet shortages that disrupted motor assembly for hybrid models. European component makers such as Bosch and Mahle reported order backlogs stretching into Q4, as licensing uncertainty forced them to redirect orders to more expensive secondary suppliers. Suppliers of sensors, alternators, and electric traction inverters have been forced to reduce production forecasts by as much as 20 percent this quarter.
Automotive executives describe a sense of “supply chain déjà vu,” recalling the 2010–2011 rare earth crisis when China temporarily halted exports to Japan over a territorial dispute. That episode triggered a global scramble for alternatives but ultimately reinforced China’s demotion of upstream capacity to foreign partners. While governments from Canberra to Ottawa have since announced critical mineral strategies, new mines and processing plants require years of permitting and capital, and still often depend on Chinese refining for final output. In the meantime, factories in the U.S. and Europe face the prospect of paring back EV rollouts as battery materials become more expensive and less certain.
Challenges in Diversification Efforts
In response to Chinese dominance, the U.S. and Europe have launched parallel initiatives to diversify supply chains. Washington’s IRA (Inflation Reduction Act) offers production tax credits for EVs assembled with North American battery cells; the European Union’s Critical Raw Materials Act sets quotas for local sourcing of key minerals. But shifting supply chains is neither quick nor straightforward. New lithium projects in Australia and Canada can produce spodumene concentrates, yet lack domestic facilities to convert them into battery-grade lithium carbonate or hydroxide without sending shipments to Chinese refiners that hold 70 percent of global capacity. Similar challenges afflict cobalt: even if mines in Africa operate under Western consortiums, most cobalt feedstock still passes through Chinese chemical plants to achieve automotive-grade purity.
Alternative rare earth suppliers—such as the proposed mine in Nebraska—face their own hurdles. Refining rare earth oxides requires specialized equipment and high-temperature separation processes that only a handful of non-Chinese facilities can match. While Australia’s Lynas Rare Earths is building a processing plant in Texas, it will not reach full capacity until late 2026, and early production is earmarked primarily for military-grade materials. As a result, Western automakers remain tethered to Chinese-sourced rare earth alloys for their neodymium-iron-boron (NdFeB) magnets and must navigate Beijing’s licensing regime for any urgent requirements.
China’s influence extends beyond magnets and batteries. Vehicle electronics—instrument clusters, ADAS cameras, radar modules, and infotainment chips—often contain gallium, germanium, and silicon carbide components. In December 2024, Beijing imposed an export ban on gallium and germanium to select Western countries, citing concerns over “sensitive technology transfer.” Although non-Chinese suppliers have begun exploring alternative sources in Europe and North America, capacities remain limited at scale. This constraint endangers not only sensor modules but also high-voltage power electronics that rely on silicon carbide semiconductors, for which Chinese firms control about 60 percent of global production.
Sensors for autonomous driving—lidar units, radar transceivers, and machine-vision processors—are likewise affected. Many of the advanced imaging chips come from fabs in East Asia, which depend on Chinese-manufactured photoresists and etching gases. When Beijing threatened in early 2025 to restrict certain semiconductor-grade chemicals, manufacturers from Europe to South Korea scrambled to secure stockpiles; yet without alternate suppliers, any prolonged cutoff could hamper the rollout of Level 2+ and Level 3 autonomous systems, delaying planned launches by global OEMs.
Domestic Policy Responses and Future Outlook
Facing intensifying pressure, several governments have stepped up investment in domestic mineral and battery processing. The U.S. Department of Energy has announced $3.5 billion in grants for battery recycling and processing facilities, aiming to recover lithium, nickel, and cobalt from spent EV packs by 2026. The European Commission has earmarked €5 billion for clean-tech manufacturing clusters, focusing on expanding refining capacity in Sweden and France. However, even with these efforts, experts warn that breaking China’s chokehold will take years, if not decades.
Meanwhile, Beijing continues to deepen its grip. In May 2025, state-owned enterprises merged two of China’s largest rare earth processors into a single national champion, streamlining decision-making and reinforcing export licensing authority. At the same time, subsidies for domestic EV production and an expanding network of charging infrastructure ensure that growth in China’s own auto market remains insulated from foreign supply disruptions. Although Chinese automakers face slower growth than a year ago, they still account for nearly half of global EV sales, underpinned by robust in-country supply of magnets, cells, and chips.
As the auto industry accelerates its shift toward electrification and autonomy, the materials and components that once seemed abundant will become battlegrounds of geopolitical competition. For global automakers, reliance on China’s supply chain is no longer optional—it is the reality. Until alternative sources scale at pace, Beijing’s licensing offices and state-run conglomerates will continue to determine who gets the magnets, batteries, and chips needed to keep assembly lines humming. In this new era, control of raw materials and semiconductors may prove as critical to the future of mobility as the vehicles themselves.
(Source:www.marketscreener.com)