Chinese tech giants retreat from European market amid competition and regulation

The race to secure raw materials for electric vehicle (EV) batteries is intensifying as automakers and battery manufacturers compete for limited resources. This competition is now extending beyond just battery metals to include other essential materials needed for battery production.

Traditionally, the focus has been on securing lithium, cobalt, and nickel – the primary metals used in battery cathodes. However, industry players are now also vying for materials used in other battery components, such as anodes, electrolytes, and separators.

Beyond Cathode Materials

The expanded competition now includes graphite, the dominant material used in battery anodes, which accounts for about 95% of the anode market. Companies are also securing supplies of synthetic graphite, manufactured from petroleum coke, which is preferred by many battery makers despite being more expensive and energy-intensive to produce than natural graphite.

Other critical materials receiving attention include copper foil, electrolytes, and separators – the latter being thin membranes that prevent short circuits while allowing ions to flow between electrodes. These components are essential for battery functionality and safety.

Manufacturers are employing various strategies to secure supplies. Some are taking equity stakes in suppliers, while others are establishing joint ventures or signing long-term procurement contracts. Many are creating vertically integrated supply chains to reduce dependency on external suppliers.

This competition isn’t just about securing raw materials but also about ensuring processing capacity. For example, Volkswagen has partnered with Belgian materials group Umicore to build cathode material production facilities in Europe.

These developments are occurring against a backdrop of slowing EV sales growth in major markets like Europe and heightened concerns about Chinese dominance in the battery supply chain. Western governments are responding with initiatives like the U.S. Inflation Reduction Act, which offers tax incentives for domestically produced EVs with battery materials sourced from the U.S. or its free trade partners.

The European Union’s Critical Raw Materials Act similarly aims to reduce dependency on imports for strategic materials. Meanwhile, China maintains its dominant position in battery supply chains, particularly in materials processing.

Another key trend is the push by battery manufacturers to develop technologies that reduce reliance on the most constrained materials. This includes sodium-ion batteries that eliminate the need for lithium and cobalt, and solid-state batteries that promise greater energy density.

Experts suggest that while the battery industry faces short-term challenges, including oversupply in some segments, long-term demand for batteries remains strong. This is driven not just by EVs but also by the growing energy storage sector.

As competition intensifies, companies that secure reliable, cost-effective access to the full range of battery materials will gain significant competitive advantages in the evolving electric mobility landscape. This broader focus on the entire battery material spectrum, rather than just cathode metals, reflects the maturing understanding of what it takes to build a resilient battery supply chain.